Coinstar's 1Q earnings drop as Redbox growth slows

Published on NewsOK Modified: April 25, 2013 at 5:57 pm •  Published: April 25, 2013

SAN FRANCISCO (AP) — Coinstar's first-quarter earnings plunged 58 percent amid signs that its Redbox kiosks for DVD rentals are losing their appeal as more people switch to Netflix and other Internet video services.

The results announced Thursday still turned out better than analysts anticipated, despite Redbox's slowing revenue growth. That was enough to lift Coinstar Inc.'s stock by nearly 8 percent in aftermarket trading.

The company, which is based Bellevue, Wash., also disclosed plans to change its name to Outerwall. If shareholders and regulators approve the idea, Coinstar will become known as Outerwall this summer and its stock will begin trading under the ticker symbol "OUTR."

Management believes the new identity will underscore the company's ambitions to push "the walls of retail into a new dimension." As part of that effort, Coinstar is expanding beyond coin-counting machines and DVD rentals by beginning to dispense coffee and tickets to concerts and other events through its in-store kiosks.

Not long ago, there was speculation that Coinstar might change its name to Redbox to highlight its ownership of the more than 40,000 brightly colored DVD-rental kiosks set up in supermarkets, pharmacies and other stores.

Although Redbox brings in most of Coinstar's revenue, the DVD rental business is facing an increasingly uncertain future as more people embrace the convenience of being able to watch video on any Internet-connected device.

In the latest evidence of the phenomenon's building momentum, Netflix added another 2 million U.S. subscribers to its Internet video service during the first three months of the year to propel its total number of streaming customers beyond 29 million. At the same time, Netflix shed another 240,000 subscribers to its DVD-by-mail rental service.

Redbox's first-quarter revenue rose by less than 1 percent from last year to $508 million. The revenue probably would have declined if Redbox hadn't been operating more kiosks than it was a year ago.

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