2 Billion Reasons Why the DVD Isn't Dead

Netflix (Nasdaq: NFLX  ) may be shedding DVD customers, and DISH Network (Nasdaq: DISH  ) may be closing up more Blockbuster stores, but there's still life in optical discs when it comes to cheap movie rentals.

Redbox parent Coinstar (Nasdaq: CSTR  ) revealed earlier this week that its growing fleet of automated kiosks have spewed out 2 billion discs since the concept's inception.

If you see that your local Redbox machine is a little lighter than usual today, it's because Redbox is giving away free nightly rentals today to celebrate the milestone. You'll have to go to Redbox's page on Facebook to snag the free code, but you'd better hurry: The promotional code is only good today. It's good only for a nightly rental and doesn't include Blu-ray discs or video games (although those will be discounted by the price of the DVD rental).

Coinstar couldn't have planned this any better. Renter No. 2 billion checked out Drive at a McDonald's (NYSE: MCD  ) . Drive is a pretty new release that was critically acclaimed. It didn't fare well at the box office, but it should be a strong sleeper hit at the retail level. Mickey D's isn't just the world's largest restaurant chain. McDonald's was an early financial backer of Redbox, and a Redbox presence at many of its burger eateries has been a win-win: Redbox receives traffic, and Mickey D's knows that it will get repeat traffic on the returns.

There are now 35,400 Redbox kiosks around the country, and more than two-thirds of the population lives within a five-minute drive of a location.

Redbox isn't just a survivor. It's thriving. It took Redbox several years to get to a billion rentals, but the second billion came in just 18 months.

Coinstar's Redbox business surged 40% in its latest quarter. It was able to pull off a 20% price hike at a time when Blockbuster has been trying to lower prices on a nightly basis and Netflix got burned with its summertime increase.

Coinstar is targeting revenue growth of just 17% this year, but it's clearly still growing.

It's a different scene elsewhere. Netflix shed 2.76 million DVD plan subscribers in the final three months of last year. DISH is trying to devote more of the rental space at Blockbuster to supporting its satellite television business.

The optical disc may not be around forever, but Redbox is making sure that it will be the one squeezing the last drops out of the media before digital delivery takes over.

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Motley Fool newsletter services have recommended buying shares of Netflix, Coinstar, and McDonald's. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Longtime Fool contributor Rick Munarriz has been a Netflix subscriber and shareholder since 2002. He does not own shares in any of the other stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.

Read/Post Comments (3) | Recommend This Article (3)

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Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 08, 2012, at 4:52 PM, WhiteHatBobby wrote:

    In some areas, the request for Blu-Ray and higher-definition DVD's are still better quality than the on-demand streamed SD quality. In an era where all televisions sold are of the HD variety, theatre-quality matters as few television programmes are produced in 480p, we know it matters. Furthermore, DVD's are better than clouds (as we saw in the Megaupload scandal) for the important storage and archival of files. This year, I've adopted storage of my TD Ameritrade files on DVD, and my tax returns are now DVD-archived for 11 years (soon to be 12 years).

  • Report this Comment On March 09, 2012, at 2:06 PM, 48ozhalfgallons wrote:

    No Dolby 5.1; no DTS; no 1080p. So what is streaming all about?

  • Report this Comment On March 10, 2012, at 3:26 PM, funspirit wrote:

    Drive sucked! Sorry, no sleeper hit dude.

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