Can Verizon And Redbox Compete With Netflix, Apple, And Amazon?

Coinstar shares are up more than 13% in after-hours trading on a big news day for the relatively small parent of Redbox. The twist with the announcement involving Blockbuster Express is that the kiosks you see in supermarkets and drug stores aren’t owned by Dish Network, which last year bought the famous video rental chain. The kiosks are made by NCR, which had licensed the Blockbuster name. But now its chief competitor, Coinstar, says it has agreed to buy the NCR Entertainment business line for up to $100M. Coinstar also says that it will “procure from NCR hardware, software and services” that will provide NCR with $25M over five years. NCR had been looking to get out of the kiosk business, which had also become a thorn in Dish Network’s side. The deal needs to pass muster with anti-trust regulators. If it does, then the companies expect it to close in 3Q. If it doesn’t, then Redbox will have to pay NCR a $10M break-up fee. NCR sent Blockbuster Express customers an email today assuring them that until the sale closes “we will continue to run the business as we have been, focused on bringing you the latest New Release movies with most titles only $2 for the first night.”

The announcement came as Coinstar also disclosed 4Q earnings that were well ahead of expectations. For the last three months of 2011, it generated net income of $31.5M, up 170% from the period last year, on revenues of $520.5M, up 33.2%. Analysts thought that revenues would come in at $498M. Earnings for continuing operations, at $1 a share, also handily beat the 68 cents that the Street forecast. Redbox was the star of the show with revenues up 39.5% to $445.6M.  ”The strength of our core businesses provides a solid foundation that enables us to focus on key growth initiatives in 2012, including our joint venture with Verizon that was announced earlier today,” CEO Paul Davis says. “We are delighted to be partnering with Verizon to offer consumers affordable entertainment in both physical and streaming formats and look forward to launching our service in the second half of the year.”

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