Outerwall (yes, that’s the company’s name) also announced a new president for Redbox: Mark Horak, who’ll move from Warner Bros Home Entertainment on March 17 to run the DVD kiosk company. But the financial disclosures are probably most responsible for the 10%+ jump in Outerwall’s share price in post market trading. Net income at $22.7M was down 1% vs last year, on revenues of $593.7M, +5.4%. The revenue number was slightly below analyst forecasts for $596.1M. But diluted earnings from continuing operations at $1.55 a share beat predictions for $1.22. The results show, though, that Redbox is feeling its age. It contributed $496.4M to revenues, +1.7%. Operating income at $111.3M was +39.2% — but that included $7M from an accounting change that’s “expected to reverse in the first quarter of 2014,” the company says. Redbox had 192M rentals in the quarter, +2.2%, with revenue per kiosk +2.1%. Sales at kiosks open at least a year was up 0.9%. Blu-ray discs accounted for 14.2% of rentals and 16.3% of revenue and October rentals were weak and December “did not perform as well as we expected” — partly due to a later than usual Thanksgiving — the company says. But November was “an exceptional month” helped by White House Down and Grown-Ups 2. Video games accounted for 2.7% of rentals, a slight pull back from last year’s 3%. Outwall’s board increased the stock repurchase authorization to $500M, bringing the …
Outerwall‘s stock price is up about 8% this morning, the first trading day after the activist investor group disclosed it bought 3.8M shares — about 13.5% of the total – and wants the owner of the Redbox DVD rental kiosks to begin “a review of strategic alternatives” that could include a sale or breakup. Now the company’s largest shareholder, Jana Partners said in an SEC filing that Outerwall’s stock is “undervalued” and it wants management to consider “a strategic transaction, selling or discontinuing certain businesses, or pursuing a sale” of the company to provide “a significant return of capital to shareholders.” Jana also said it wants to talk to management about “other topics including management and board composition, strategy and future plans.” Outerwall — formerly known as Coinstar — has been on the defensive since it disclosed last month that Q3 earnings will fall short of expectations. One problem is that Redbox is “mature, making investment in the company difficult for growth investors,” Wedbush Securities analyst Michael Pachter says. But B. Riley’s Eric Wold says this morning that Jana’s interest in Outerwall could highlight “long-term opportunities that still remain with physical rentals” many of which have been “unrecognized and undervalued by investors.”
Stock prices for kiosk company Outerwall are down more than 20% in post-market trading after it lowered its financial projections for the year noting in a release that promotion discounts in July and August “drove consumers toward more single night [DVD] rentals.” As a result, the net revenue per rental in Q3 likely will fall as much as 9 cents vs last year. The company, formerly known as Coinstar, also says that it may see 6.5M fewer rentals than it expected in Q4 “as the number of titles has shifted to either later in the fourth quarter or into 2014.” The number of shifts “is greater than normal.” The Redbox owner had high hopes for Q3: Last year the company struggled to compete with the Summer Olympics, and the number of customers is up 5% in the first half of 2013 vs the period last year. Indeed, CEO J. Scott Di Valerio says that “both rentals and revenue for Redbox increased significantly in July and August” — even though they ultimately “were not to our expectations.” He vows to cut the number of consumer promotions, reduce content and operating costs, and repurchase an additional $100M of Outerwall shares in Q4. The company dropped the top of its Q3 revenue projection, made in July, by 6.5% to $589M with earnings per share down 37.8% to a maximum of 94 cents. For the full year, revenues are now projected …
A lot of people are asking that question today after the company behind the DVD rental kiosks reported disappointing results for Q2. Shares of Outerwall (formerly Coinstar) closed down 13.2% after it said that Redbox revenues increased just 4% compared with the same period last year — even though the total number of kiosks was up 13%. Redbox came up short as bargain-hunters took advantage of promotions and only kept discs out for one night, resulting in a 9.9% decline in average revenue per kiosk. (DVDs go for $1.20 a night with Blu-ray discs $1.50.) The company also cut its forecast for the number of kiosks it will add this year while the experiment to sell sports and entertainment tickets at the kiosks “did not meet expectations”, CEO J. Scott Di Valerio told analysts. These developments will “accentuate concerns that the DVD rental market is quickly approaching saturation, and we believe that this is probably true”, says Wedbush Securities’ Michael Pachter. He also has soured on the Redbox Instant By Verizon streaming joint venture, saying the rollout “is moving at a very slow pace” and “revenues and profitability remain elusive.”
The stock is up more than 5% in after-market trading following the earnings report — plus an announcement that the company behind the Redbox kiosks plans to change its name to Outerwall. Whatever it’s called, it reported Q1 net income of $22.6M, -57.9% vs the period last year, on revenue of $574.7M, +1.1%. The revenue number is short of the $579.4 that analysts expected. But core earnings per share, factoring out one-time gains and losses, came to 93 cents — well ahead of the 86 cents the Street anticipated. The Redbox disc rental kiosk unit generated $92.7M in operating income (-15.3%) on revenue of $507.9M (+1%). The slight top-line growth was mostly due to the additional kiosks in the field. Profits took a hit as a result of “an increase in product costs related to higher DVD content purchases” — including increased buys from Warner Bros resulting from the deal they struck late last year. Coinstar says that “the physical market is stabilizing following further Blockbuster store closings and Netflix’s continued efforts to shift their disc customers to streaming.” Meanwhile, Blu-ray disc rentals “exceeded our expectations” and represented 14.2% of Redbox revenue, and 12% of total rentals. The company expects the HD discs to account for as much as 16% of Redbox revenue in Q2. CEO J. Scott Di Valerio says that the “continued growth in Redbox market share shows our ability to win with consumers.”
The stock is down 3.9% in initial after-hours trading. The maker of the Redbox DVD rental kiosks says that CEO Paul Davis — who has held the top job since 2009 — will retire in March, and be replaced by CFO J. Scott Di Valerio. The change comes as the company, in a joint venture with Verizon, begins to roll out a streaming service called Redbox Instant that aims to compete with Netflix and Amazon. The announcement about Davis’ departure also notes that Coinstar expects to hit its full-year and Q4 forecasts for revenue and cash flow growth with earnings from continuing operations at the high end of a range it provided. But that’s “primarily due to lower company G&A expenses and certain tax benefits at Redbox” — not necessarily strong results from the core business. Here’s the release:
We still don’t have a firm start date, although the joint venture between Redbox and Verizon says that consumers will be able to subscribe to a “beta product” sometime this month. Redbox Instant by Verizon‘s streaming service will cost a penny more than Netflix and will include four, one-night credits each month to rent DVDs at Redbox kiosks. For an additional dollar a month, customers can use the credits to rent Blu-ray discs. We still know little about the streaming content — Warner Bros is the only studio that has publicly said it will participate. But Redbox Instant says its new deal with EPIX will enable it to offer Paramount, Lionsgate, and MGM movies 90 days after they appear on EPIX’s pay TV channel. The venture also will sell and rent digital versions of new movies from Lionsgate, NBCUniversal, Paramount, Relativity and Sony Pictures Home Entertainment. The web-based service will work with mobile devices powered by iOS and Android operating systems as well as Samsung Blu-ray Players and TVs with SmartHub, LG Smart TV and Blu-ray Players, and Google TV. Here’s today’s release:
That’s one of the details disclosed by web site GigaOm, which found a help page for people beta testing the streaming service that’s due to launch next month — with hopes to challenge Netfllix and Amazon Prime. (The help page now requires a password to access.) To be sure, things could change by the time Redbox Instant By Verizon launches; possibly December 17 based on info on the page. Still, the disclosures are interesting because Redbox and Verizon have been unusually tight-lipped about their plans. The report says they tentatively expect to charge $6 a month for unlimited access to videos. The joint venture has only disclosed one supplier: Warner Bros. But screen grabs show that beta users can access films from Lionsgate (including Killers and Tyler Perry’s Madea’s Big Happy Family), Paramount (Rango, Iron Man 2, and Thor), Universal (Dr. Seuss’ The Lorax), and Roadside Attractions (The Conspirator and The Last Godfather). Last month Coinstar CEO Paul Davis, whose company owns Redbox, told analysts that they’re “getting the content secured” and “making great progress.” Users reportedly will be able to stream to devices powered by Google’s Android and Apple’s iOS as well as Microsoft’s Xbox. For an additional $2 a month, subscribers receive four credits, which expire at the end of each month, to rent DVDs at Redbox kiosks. There’ll also be opportunities to rent and download content via the web.
UPDATE, 3:23 PM: If you were waiting for detailed information about the Redbox Instant by Verizon streaming plans, you’ll have to keep waiting. Coinstar told analysts in a conference call that the online service is in an internal beta test and the test will be opened to the public soon. “We’ve been really pleased with the progress,” CEO Paul Davis says. But he didn’t offer much more, including what studios might participate in addition to Warner Bros. “We’ll talk more about what the other offerings will be when we go public.” Coinstar said it kicked $10.5M into the joint venture in Q3. If it has to add more in Q4 then it will be “relatively small.”
PREVIOUS, 1:16 PM: Even the announcement of a new distribution agreement with Warner Bros — which will provide Redbox kiosks with home video titles 28 days after they hit retail stores — wasn’t enough to help the Coinstar in investors’ eyes. The stock price started to dive in late trading, and continued to fall about 8% after hours when the company behind the Redbox kiosks reported disappointing Q3 results. Net income of $36.8M was down 9.5% vs the period last year, on revenues of $537.6M, up 15.5%. Analysts thought that revenues would come in closer to $557M. And earnings per share from continuing operations, at $1.14 was a penny shy of forecasts.
OAKBROOK TERRACE, Ill. (October 25, 2012) – Redbox, a wholly owned subsidiary of Coinstar, Inc. (Nasdaq: CSTR), and Warner Bros. Home Entertainment have signed a multi-year agreement to bring Warner Bros.’ Blu-ray Disc™ and DVD titles to Redbox® kiosks 28 days after their retail release dates.
In addition, Redbox announced plans to join the Digital Entertainment Content Ecosystem (DECE) and has agreed to promote UltraViolet through a program of mutually agreed-upon promotions and marketing tactics designed to help retail customers discover UltraViolet.
“For the past 10 years, Redbox has been committed to giving consumers affordable access to new-release entertainment,” said Galen Smith, senior vice president, Redbox. “This new agreement continues this commitment and represents an exciting new chapter in our relationship with Warner Bros., and an opportunity to explore our consumers’ interest in UltraViolet.”
The Coinstar-owned DVD kiosk company had signaled that it might begin to offer tickets — although today’s announcement doesn’t include movie theaters, as at least one analyst expected. Redbox, which is owned by Coinstar, says that it’s teaming up with New Era Tickets and Sparkart for the new Redbox Tickets initiative which begins today in Philadelphia and should include all of the city’s 650 kiosks by mid-October. Customers can buy passes at the machines for an additional $1 per ticket; the tickets themselves will be priced at face value “or below,” the company says. Available events will be listed at the kiosk and online at www.redbox.com/tickets. Buyers then can either pick up tickets at the venue or, for New Era Tickets’ clients, print them out at home. Redbox will start off with sporting events, concerts, cultural events and what it calls family-friendly attractions. They include the Philadelphia Film Festival, an upcoming Carrie Underwood concert, NASCAR at Pocono Raceway, and Villanova Athletics games. “For the past 10 years, Redbox has made movie rentals convenient and affordable for consumers, and now we’re bringing the same access to more entertainment with Redbox Tickets,” Redbox President Anne Saunders says.
The stock price is up more than 8% at midday after the New York Post said that the owner of the Redbox DVD rental kiosks is talking about selling itself to “an undisclosed private-equity firm.” Coinstar has a market value of about $1.7B. Some may consider it a bargain at a price that’s less than 9 times its expected earnings — relatively low compared to most media and technology companies. So, is the report accurate? CEO Paul Davis sidestepped the question today in an appearance at Canaccord Genuity’s Global Growth Conference. “We have no idea where [the story] came from,” he said. “We’re not in the business of commenting on other people’s stories. We’re head down focused on running the business and we’re happy with the progress we’re making.” He remains bullish about the prospects for DVDs and Blu-ray discs. “We looked at the music industry and saw how long it took before digital actually overtook physical and it was much much longer than people had anticipated.” He added that the company wants to play in both worlds, which is why it’s preparing to launch its Redbox Instant by Verizon streaming service later this year. In addition the company is “looking at other products that we think over time can repurpose the Redbox kiosks.”
This is the second time over the last 12 months that the president has split from Coinstar’s influential DVD kiosk unit. Gregg Kaplan, a Redbox co-founder, became interim president in July 2011 when another co-founder, Mitch Lowe, left. Kaplan is leaving “in order to pursue new opportunities,” the company says. He’ll be replaced on August 27 by Knowledge Universe Chief Marketing Officer Anne Saunders, although Kaplan will remain Coinstar’s COO until the end of March 2013. “I look forward to continuing to work closely with the teams, including our talented and dedicated employees around the country, to ensure a smooth transition in the months ahead,” he says. Prior to joining Knowledge Universe, Kaplan worked at Bank of America, Starbucks, and AT&T Wireless. Redbox has 38,500 kiosks in the U.S. and Canada. She’s taking charge as the company and Verizon plan to launch a national streaming video service: Redbox Instant by Verizon.
Sony had the right to bail out on September 30, but will hang in for two years — with two, one-year options to extend the agreement past 2014 — Redbox parent Coinstar says in an SEC filing this morning. The latest change in their alliance also will give Redbox the option to license Blu-ray discs from Sony. When the companies revised their deal last year, Sony said that Redbox could keep DVDs in its kiosks for as long as a year — twice as long as the studio previously allowed. “With three years of data to analyze, we believe it is a positive sign that Sony has not seen any adverse impact from the Redbox agreement and did not follow Warner Bros’ lead in pushing for a delay,” B. Riley analyst Eric Wold says. Warner wanted its videos to have a 56-day head start on store shelves before hitting the kiosks. Redbox refused, and now buys Warner DVDs from retailers instead of directly from the studio. The extension with Sony should come as a relief to Coinstar. Its stock has declined about 20% since last Thursday, when it disclosed Q2 earnings that fell short of the Street’s expectations. Coinstar shares are up 2.4% in early trading. No word in the filing about whether the new deal might affect Redbox’s planned streaming joint venture with Verizon: to be called Redbox Instant By Verizon.
The stock price is down about 15% after hours for the company behind the Redbox kiosks. It reported net earnings of $36.9M, +37.9% vs last year’s Q2, on revenues of $532.2M, +22.3%. So what’s the problem? Analysts thought that revenues would be closer to $545M. And earnings from continuing operations, at $1.11 a share, were short of the $1.17 forecasts. Redbox accounted for $458M in revenues, +25.9%, with operating income of $61.4M, +31.6%. Redbox had 180M rentals in the quarter, +7.4%. Interestingly, the company says that Disney’s John Carter — one of the studio’s biggest disappointments — “has performed better than our expectations”. But Coinstar notes that there’ll be 27 video releases in Q3, eight fewer than in the period last year. But August will include Lionsgate’s The Hunger Games. The company expects Redbox to generate about $2B in revenues for all of 2012. Coinstar CEO Paul Davis says that Redbox “began its expansion into Canada, extended its lead in physical rentals achieving more than 42% unit market share, and closed the NCR transaction” which provides it with the company’s Blockbuster Express-branded kiosks. Earlier this week the company said that it has named its planned streaming service Redbox Instant By Verizon. Coinstar had a one-time gain of $12M in Q1 from licensing the Redbox name to the joint venture. Its share of the losses from the venture this year is expected to be $18M.
Redbox and Verizon are going to have a tough time catching up with Netflix if they continue to haphazardly dribble out news about their streaming plans — the way they did this morning. Five months after Redbox and Verizon created their joint venture, they quietly launched the website for its Alpha testing which displays the mouthful of a name for the service: “Redbox Instant By Verizon.” The slogan appears to be: “DVDs at the kiosk + instant streaming hits, all in one fist-pumping package.” It also discloses who’ll be running the show. The CEO is Shawn Strickland — one of Verizon’s stars. The former financial analyst became one of the company’s more public representatives after he helped to drive its FiOS initiative and became president of the company’s New York south/east region. His appointment, along with the experience behind some of the streaming JV’s other newly named execs, “surprises us, and speaks to how serious Verizon is taking their entrance into the subscription video on demand (SVOD), over-the-top (OTT) video business,” BTIG analyst Rich Greenfield says this morning. He adds, though, that he “still cannot fully understand ‘why’ Verizon wants to be in the SVOD business so badly.” Greenfield also questions whether Strickland’s experience is applicable to the new venture. “FIOS simply paid well-established rates for ‘all’ broadcast/cable network content, where at Redbox Instant, the task is to source the ‘right’ content at the ‘right’ price …
Disney has quietly joined Universal, Fox, and Warner Bros in refusing to provide DVDs to low-cost rental firms including Redbox and Netflix on the day the discs go on sale, Home Media Magazine reports. The unannounced change caught people’s attention this week when Redbox kiosks didn’t have Disney’s John Carter, released on home video this past Tuesday. But those waiting for the financial mega-bomb to hit Redbox — so they’d only have to pay $1.20 a night to see what the fuss was about — won’t have to wait long. The company will simply buy discs from retailers so it can offer them for rental by June 12. “Redbox has always worked with Disney on a per title basis, without a contract,” the Coinstar-owned company says. “We will be sourcing John Carter through alternative means.” Redbox began to do the same thing with Warner Bros releases this year after the studio said it would double the delay period to 56 days before it would offer wholesale terms for its rental discs. Redbox has agreed to terms with Universal and Fox that include a 28-day delay. Other studios including Paramount and Lionsgate provide home videos the same day they hit retail shelves.
Coinstar CEO Paul Davis — whose company owns the Redbox DVD rental kiosks — appeared on CNBC today to discuss a venture that’s almost as important to folks in the media business: coffee. Coinstar shares were up 6% after Coinstar said that by year end it will roll out 500 kiosks under the brand name Rubi that will offer Starbucks-owned Seattle’s Best Coffee. They’ll charge as little as $1 for specialty drinks including mochas and vanilla lattes. Davis also briefly discussed Redbox’s expansion plans, including the streaming venture with Verizon.
Wedbush Securities’ Michael Pachter thinks so after attending Redbox parent company Coinstar’s briefing yesterday for Wall Street analysts. Although the company only referred cryptically to its plan for a “new Redbox venture,” Pachter says this morning he believes that Coinstar “intends to sell movie tickets through its Redbox kiosks, helping its studio partners to drive higher-margin theatrical exhibition sales, while driving awareness of films that will ultimately come to DVD.” The company said in its presentation that it plans a market test for its “first Redbox new business concept” this year. The company has about 37,000 kiosks in 30,000 locations. Execs also offered a few details about their broadband venture with Verizon, on track to launch in the second half of this year. No word on pricing, but Pachter says “it appeared to us from the context of the discussion” that the subscription offer “will allow for unlimited streaming and limited DVD rentals at Redbox kiosks.” In addition to the talk about Redbox, Coinstar execs said they plan to sharply increase the number of kiosks that sell coffee, consumer electronics, beauty products, and prepared foods. In addition, Coinstar’s rolling out photo booths, and machines that enable consumers to get cash for their unused gift cards and used cell phones.