Opportunity over at Coinstar?
Redbox (a subsidary of Coinstar (CSTR)) recently announced that they will be coming out with a Disc + Digital Service with Verizon called Redbox Instant. $8 a month gets customers unlimited streaming of movies through EPIX and 4 rentals at Redbox Kiosks, I find the connection with EPIX to be very attractive as that connects them to Paramont Pictures and Lionsgate (Mission Impossible, Hunger Games) Redbox will be able to have these titles available 90 days after release. Also Redbox Instant will also be offering electronic sell-through (EST) and video-on-demand (VOD) through video agreements with major studios.
Now that we know what exactly Redbox Instant is I'd like to break each part down. First we can see this as direct competition to Netflix (NFLX) with the major difference being that instead of being through the mail the rentals will be picked up at Kiosks. I for one like this, even though mail requires that the user doesn't have to leave their home, redbox kiosks are everywhere and I see the idea of being able to get the movie the day you want it as a good one.
Comparing prices should give Netflix shareholders a scare, the Redbox Instant Disc + Digital costs only $8 a month, while Netflix charges $8 for both Disc and Digital, double the price of Redbox. The fact that all of the kiosks are already and place and the connection with VZ for streaming videos gives Redbox a much lower overhead and the ability to undercut Netflix significantly.
I also am very excited at the fact that the Redbox Instant service will be offering (EST) and (VOD) because this is how the younger generations like to do it. Instead of going out to get DVD's they would much rather sit at home and rent it through their TV's for a night: personally I can't get over the cost difference and would rather make a run to the Redbox down the block, but when it's my friends parent's money I could care less.
Taking a look at Coinstar stock they are currently at $51.14, a small pop has put them a bit over their 52-week low but still looks like a nice time to buy, but is it? Earnings are projected to keep growing to $5.20 next year, and another encouraging sign Coinstar has only disapointed on earnings once over the past 15 earnings releases. The "Coinstar" part of there business only account for 25% of earnings, and though it is a good business I don't see much growth coming there, or in there recent push for a coffee machine serving Seattle's Best. Their is concern about the fading of the DVD market but I feel the Redbox Instant is a great idea as their customer base begins to change to simply streaming; they will be able to still serve those who want DVD's and provide a place to go for streaming when customers make that decision.
Looks to me like there is growth to be had and now might be a good time to get in on Coinstar, what about you?
*Check out my blog to see graphics http://teenstockboss.blogspot.com/2012/12/opportunity-over-at-coinstar.html *