Has Redbox already peaked?
The parent company of the video-rental service sees profits plunge 27%, and isn't expecting much growth anytime soon.
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.
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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
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.
redbox needs to update quicker and rotate stock and/or add a second machine..........people who use streaming are whacked on crack!
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