Does the death of the DVD mean there's a future in ticket sales? If you're Coinstar (NASDAQ:OUTR) subsidiary Redbox, it does. It's teamed up with International Speedway (NASDAQ:ISCA) to begin selling NASCAR tickets at its Los Angeles-area movie kiosks for a March 2013 event.
The move into NASCAR is something of a natural progression for Redbox Tickets, a service it launched a month ago to sell unsold concert tickets with just a $1 markup. While the initiative is currently limited in that it offers generally less desirable seating at venues that haven't been sold out -- meaning Live Nation Entertainment's (NYSE:LYV) Ticketmaster doesn't have anything to worry about just yet -- it provides another avenue for Coinstar to extend the life and usefulness of its kiosks as DVDs slowly fade out.
Yet it's obviously a shot across the bow of the ticket seller whose virtual monopoly of the industry has often created friction among concertgoers and the bands themselves. The alt-rock (and personal favorite) band Pearl Jam famously brought an antitrust lawsuit against Ticketmaster in the 1990s over its surcharge practices, though it finally capitulated and began using the service again. There are few alternatives to Ticketmaster these days, but a large, well-financed rival adding only a very low markup fee could prove to become a popular destination.
The NASCAR affiliation could be a benefit to both companies. As noted, Coinstar gets more mileage out of its kiosks, bringing more customers to what is becoming more of an entertainment destination -- in addition to the tickets and movies, you can also rent games from Redbox -- while the racetrack has the chance to bring more fans to a meet.
Going in circles
Last quarter's earnings were emblematic of NASCAR as a whole: lower attendance marking lower revenues as a sluggish economy and high gas prices fuel a decline in viewership. Total revenues at International Speedway were down 23% from the year-ago period and operating profits were virtually wiped out compared to the $20.5 million profit in 2011. It was a similar story at Speedway Motorsports (NYSE:TRK), where revenues fell 20%.
For Dover Motorsports (NYSE:DVD), it's tough to make a comparison because all of its NASCAR-related events were held in the third quarter this year while it had none in the same period last year. So the $22.8 million in revenues it generated this time around aren't comparable to the $2.9 million it generated in 2011.
NASCAR remains the country's top spectator sport (no matter what the NFL might say), but it's taking it on the chin. Critics claim the ruling body is making the event more "scripted" to ensure popular drivers remain in the running, something more akin to World Wrestling Entertainment than a sport born out of rum-running. Making tickets more easily accessible with little markup might do the sport better than turning it into a three-ring circus.
One lump or two?
And it would be difficult for Coinstar to ignore the fact that it needs something else to keep bringing people to its kiosks. Its third-quarter profits were down 1% due to fewer new DVD releases and the Summer Olympics even as DVD rental revenues climbed 18% to $460 million on the back of higher prices and the addition of more kiosks.
It certainly looks like a win-win relationship, or at the very least no one is hurt by trying it. More suspect might be its venture in coffee: Some 500 Rubi Coffee kiosks will dispense Starbucks' (NASDAQ:SBUX) brews.
A funeral dirge
The death of the DVD is taking its toll on Coinstar's performance, but is also threatening other venues. Dolby Labs has seen the withering market wreak havoc on operations. Certainly players need to branch out, and Coinstar needs to keep bringing more studios on board, such as its recent deal with Time Warner's (NYSE:TWX) Warner Bros. Home Entertainment to release movies to Redbox 28 days after their retail release.
While it's also testing out a streaming video service with Verizon (NYSE:VZ) in a bid to take on Netflix(NASDAQ:NFLX) (NASDAQ:NFLX) head-on, Redbox as a redneck ticket seller just might be the ticket to improving its bottom line.
Rich Duprey owns shares of Dolby Laboratories. The Motley Fool owns shares of Netflix and Starbucks and has the following options: short JAN 2013 $47.00 puts on Starbucks. Motley Fool newsletter services recommend Dolby Laboratories, International Speedway, Netflix, Starbucks, and Time Warner. 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.