Has Redbox already peaked?

The parent company of the video-rental service sees profits plunge 27%, and isn't expecting much growth anytime soon.

By Bruce Kennedy Feb 8, 2013 5:20PM

A rental DVD is dispensed from a Redbox in Los Angeles on August 7, 2009 (Damian Dovarganes/AP Photo)There's a theory that many new technologies become obsolete about 18 months after they're introduced -- as soon as the updated, next-generation devices are rolled out. That concept can certainly be applied to computers -- and perhaps to video-rental delivery systems as well.

 

Coinstar (CSTR) announced lower-than-expected revenue in its fourth-quarter earnings report on Thursday, with profits for the quarter down 27%. It also offered a flat forecast for the current quarter.


The parent company of the automated coin-counting machines also owns RedBox, a self-service kiosk that rents out movies and video games at more than 42,000 locations across the U.S. and Canada.

 

Some analysts downgraded the stock on Friday, and it fell nearly 7% in trading to close at $48.47. Part of the issue for Coinstar appears to be the new methods of accessing videos.

 

Remember how Blockbuster destroyed your local, mom-and-pop video store? Nearly all those video-rental stores faded away with the introduction of video streaming and DVDs available both though the mail and by automated kiosk.

 

In fact, the brick-and-mortar video rental industry declined nearly 14% between 2007 and last year, according to industry analysts at IBISWorld, as online technology replaced in-store rentals.

 

And now, with Netflix (NFLX) as the dominant player in the online movie-rental landscape, competitors like Coinstar are looking to take a bite out of that rapidly growing market.

 

Coinstar is launching its own video-streaming partnership with Verizon (VZ) called "Redbox Instant by Verizon." As Mashable’s Christina Warren notes, "Redbox Instant has a long way to go before it can compete with the likes of Netflix and Amazon (AMZN). Still, I'm not willing to write the service off just yet.”

 

If the service takes off, "and Redbox claims that hundreds of thousands of people have requested access to the beta -- this story will turn itself around," says Rick Aristotle Munarriz in The Motley Fool. But he also believes Netflix might have too much of a head start for Coinstar to catch up.

 

More on moneyNOW

19Comments
Feb 8, 2013 6:56PM
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I hope they stay around for a long while. Right now streamed movies are crap sound wise.

 

I want a real uncompressed dvd or br with dolby and dts sound, my how many thousand dollar home theatre system doesnt want junk stereo sound of netfix. or the amazon

Feb 8, 2013 7:01PM
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Competition is GREAT for all of us as consumers!  Businesses competing for our money makes a better product and continually improves the quality of goods and services available to all of us.  I only hope our current President doesn't destroy private businesses in such a way that competition goes away...if so we will all suffer in ways we cannot imagine.  Too bad political "leaders" do not understand real economics.  Its quite simple really, but since "low information" voters dont understand, it is not important enough to elected politicians. 
Feb 8, 2013 8:59PM
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My family will continue to rent. We cannot afford to get streaming that would do movies justice. Hang in there. we keep promoting you
Feb 8, 2013 8:55PM
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Coinstar and Verizon, a match made in hell.  Verizon can barely keep their wireless up and running.  Coinstar only attracts the cheapest  people.  This service will be to expensive.
Feb 8, 2013 8:33PM
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I agree that streaming movies from Netflix and Amazon are not the most popular movies, but for a measly 8 bux a month the content offered isn't half bad.  I do enjoy Amazon now since they are starting to stream movies I heither have not seen and intended to and movies I have not seen in a long while.

Feb 11, 2013 12:06PM
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Everytime I go by a RedBox, there is a line of people at it!  I always wondered myself why poeple would go there as opposed to streaming.... now after reading these comments I understand.  Wow... I never thought that on line comments would teach me something!!
Feb 10, 2013 5:25PM
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http://thefinchpost.blogspot.com/
Feb 9, 2013 5:13PM
Feb 8, 2013 9:24PM
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Redbox, Netfix are one step above nothing.  Why would you need hard copies that incur late charges, skip, get lost when there are plenty of COMPLETELY FREE sites to stream from.

I gave up these media prostitutes years ago and can watch ANYTHING I want, ANYTIME.  

Now excuse me while I watch A good day to die (Die hard V), then Mama in HD 1080dP.  Both are still in theaters.
Beats trudging out to mailbox looking for that slightly used ET DVD from Netflix sent 3 days ago.  Make sure to thaw in microwave for 30-45 secs. before viewing.
Feb 8, 2013 7:53PM
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Only complete idiots do business with redbox or netflix!

 

 

 

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