Is Coinstar a Buy?

• Report this Comment On July 30, 2010, at 8:34 PM, BearishKW wrote:

  I am pleased to see this article this evening, as I did exactly what was stated, bought in today while it was down 5.5%. For a long time I shunned the red box, being a high-on-their-horse Netflix subscriber and enjoying the larger selection and streaming benefits. Redbox was for the lowly who still had dial-up at home, or who didn't know how to use a computer.

  But all it took was one trip to the grocery store with my mother while back home visiting her to make me realize that it is Netflix who should do the worrying. These kiosks are in EVERY store now, and are dominating metropolitan areas. If you pay $15.99/month for a 2 disc plan at Netflix, you can afford to downgrade to the $9.99 plan and spend the extra $5 on an instant DVD from the kiosk at the corner store. The instant gratification will take over, and soon enough you won't be on a monthly plan, and will be spending less than $10 per month on the redbox.

  As far as Coinstar as a whole, they have the change business, will be soon introducing new lines of kiosks (exploring a beauty kiosk agreement with Bath and Body works), already has a gourmet coffee kiosk in the works, etc. That's growth that Netflix will not keep up with. Simply adding video games to the redbox line will boost revenue and growth.

• Report this Comment On July 31, 2010, at 7:39 AM, BioBat wrote:

  Dvd kiosks are everywhere but they're not all owned by coinstar. Also you can't get anymore instant gratification than streaming as many netflix movies as you want without ever leaving your couch.

• Report this Comment On July 31, 2010, at 9:11 AM, jb757 wrote:

  The kiosk concept works for many but comes nowhere near NFLX's mail rental service. I viewed the DVD selection at a Redbox kiosk recently - limited movie selection plus I don't want to drive even a mile or two to return DVDs. You can't beat NFLX's massive catalogue. CSTR will not be able to threaten NFLX's mature streaming service anytime soon.

• Report this Comment On July 31, 2010, at 1:01 PM, jpwallis01 wrote:

  I love Redbox and Netflix. I have used redbox recently. Living in a small town, renting and returning redbox movies is not much of a hassle. I also like the convienience of streaming Netflix provides, my only downside of redbox is if and when they get into the streaming business as slowy hardcopies of movies will dissapear. Think: Record, 8-Tracks, Cassette Tapes. In order for redbox to be a viable company for the long run they will need To stream movies. I will pounce on the redbox IPO and am very bullish on the company for the next few years.

• Report this Comment On July 31, 2010, at 3:21 PM, BearishKW wrote:

  I may be overly bullish because I own the stock and am a customer of Redbox, however I am a Netflix customer as well so I have thought much about this, even considered owning both stocks...

  I agree 100% that there is nothing more convenient than instantly selecting and playing a video on your television through your internet connection. But I think one mistake you are making is the assumption that everyone has the ways and means, technical/computer knowhow to have a TV/internet setup to do this.

  Also, this is just a theory, but... I think Redbox, for those with kids especially, is more of a movie-going/entertainment activity than Netflix. You get in the car, go to the store, on your way out stop at the DVD kiosk to let the kids use the machine and pick out a movie for the night.

  I also don't see the DVD format dying anytime in the near future. I think gaming consoles, automobiles, computer applications, and just plain picture quality (Blu-ray, Hi Def) will keep the DVD around for a much longer life than 8-tracks, cassette tapes, etc.

  I have made these same points against Redbox in the past because I am computer savvy, time-constrained, and enjoy the netflix selection. But the truth is that it comes down to different people and other factors. Both of these companies are extreme growers, but if there is one company eating into the other's profits down the road it is CSTR over NFLX.

• Report this Comment On August 01, 2010, at 12:09 AM, jpwallis01 wrote:

  You make a good point about families going to redbox. Very intersting theory but, we are already phasing out CD's and DVD's. We have cloud computing now, Memory cards, and iPods. Most people have internet and hooking up your connection only takes a cord so long as your tv can hook up. Go to walmart, every t.v. they sell is a flat panel and can be hooked up to your computer. I believe our technology is changing faster than ever and everyone. Redbox will have excellent growth over the next few years on DVD kiosks alone, but DVD's will fade just as everything else. I own stock in CSTR and am very bullish about the company. I also owned NFLx stock, great stock, sold it for an 85% gain over three months, but i still belive w/o streaming they will go the way of Blockbuster. Were going to the clouds....

• Report this Comment On August 01, 2010, at 7:26 PM, BioBat wrote:

  I think some people have a fundamental misunderstanding as to the differences between Redbox and Netflix. Redbox is a DVD rential kiosk business while Netflix is in the movie delivery business. It's something that Blockbuster didn't understand and now they're all but dead. Netflix has succeeded because it brings movies to you and that's something Redbox doesn't do.

  Now, Netflix not only delivers movies to you, they deliver them to you INSTANTLY. And no, there is virtually no technical blockade to streaming Netflix. The only thing blocking streaming Netflix is whether or not you have high speed internet access and that's something that continues to be on the rise. Once you have that, there are no barriers to watching Netflix movies on your TV with no problems. Why? Because it's integrated on nearly every new piece of equipment you'd now buy for your TV (and in many cases integrated right into your TV interface). Wii. Check. PS3. Check. Xbox. Check. Blu Ray player. Check. Roiku player. Check. Seagate HD media player. Check. Internet enabled TVs. Check. If you can operate a DVD remote, you can watch Netflix on your TV. It's that simple. That said, Netflix still has to show they can do it in HD (my guess is the 8.99 plan will be standard def and $13.99-16.99 plans will go HD but that's just a guess). Once they do that, they're going to slowly start taking down cable companies.

  But since this is a discussion about Coinstar and Redbox this is all I have to say - they're a company that still relies almost entirely on a media that's on the way out and they're nearing saturation so the growth potential right now is pretty limited, which is why their stock took a hit (even they admit that growth is slowing). Physical storage will be replaced sooner rather than later and Coinstar/Redbox does not yet have a viable alternative to their Kiosks so from an investment standpoint, they've hit a wall. They talk of streaming but they're 4-5 years behind services like Netflix and OnDemand. If they get there, they will be a force but until then, they're a low cost DVD rental business.

• Report this Comment On August 02, 2010, at 2:45 AM, Georgep13 wrote:

  Though I don't disagree that Redbox may have difficulty expanding their market without moving beyond the Kiosk, there is going to be a good market for this niche for a long time. Redbox appeals to people who don't embrace (or can't afford) the new technology as quickly, those who don't watch many movies, those who want to watch a movie right now, and probably other reasons. I just don't agree that these folks will disappear as quickly as some think.

  Redbox is more instant than Netflix. Yes, Netflix has streaming video to view instantly; but they don't offer any new releases! I rarely use my instant Netflix feature, because there just isn't much to choose from when it comes to good, recent movies. It's great if you are an old movie buff (though, I find that there are plenty of those that aren't available either.); but, if I don't have a Netflix at home, I'm going to the Redbox to get a movie. When Netflix starts to show new releases in a streaming format, I'll conceed that Netflix is indeed Instant.

  Both Redbox and Netflix fill a different need and will do so for the next few years. Coinstar still has some good potential in her.

• Report this Comment On August 02, 2010, at 9:38 AM, madvictor wrote:

  Is anyone aware that Safeway( giant grocery store chain) is slowly closing out redbox kiosks & replacing them with Blockbuster kiosks? Local store mngr ( Co) said to me " they paid up" referring to Blockbuster.

• Report this Comment On August 02, 2010, at 10:57 AM, BioBat wrote:

  George,p13 Redbox also does not offer new releases. They have newer releases but they're restricted to releases after the first 28 days of release so they're not really instant. If you want that, you still need to go to Blockbuster or simply go buy the DVD. And while you may not use Netflix streaming that often, 60% of subscribers do suggesting that it is a viable option for most of Netflix current subscribers.

  But back to Coinstar. They missed on revenue targets even with the closing of many Blockbusters and all of movie galleries and they adjusted their 3rd quarter revenue forecasts down. They're still growing but they didn't gain any bump from the competition being eliminated, which suggests that yes, people are moving away from physical media as fast as some suspect. I think the Coinstar/Redbox growth story is all but done. They also have no protective moat around them because the barrier to entry is so tiny, evidenced by Blockbuster kiosks popping up almost as fast as Redbox ones. I think you're going to see these two companies drive each other out of business fairly quickly.

• Report this Comment On August 03, 2010, at 3:56 PM, BearishKW wrote:

  @BioBat:

  The headlines read future revenue guidance is down, but in reality, they've raised them. Something has gone extremely awry with financial reporting...companies get hammered on the day of good earnings, good guidance. Then when someone actually listens to the conference call or reads the transcript, a little blip is posted saying "it was a typo, the following numbers are accurate..."

  Fire first, aim later I guess.

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