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  • rheingoldismybeer rheingoldismybeer Apr 26, 2012 9:43 AM Flag

    Coinstar Management's Strategy?

    Someone here wrote that Coinstar's management has unique vision. What exactly is the unique "vision" of Coinstar's management? A coin counting machine or renting DVDs from kiosks isn't exactly revolutionary or visionary. Starting a content streaming service at this point means joining a group of companies that already offer the same service to millions of subs with much deeper pockets. So what's the great "vision" that this management team has in mind?

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    • The call sounds pretty good. Management is being conservative and I wouldn't be surpised if they raised guidance again for the 3rd quarter like they did a few weeks ago. I don't hear anything on this call to be concerned about.

    • tlabosky@att.net tlabosky Apr 26, 2012 5:01 PM Flag

      Did you go and get movie rights during a huge transition in the way tv is watched. The real value is the movie rights and they did it.

    • Here are some examples of Coinstar Management's strategic vision:

      1) Recognizing that acquiring NCR's boxes provided a one-two punch - expanding the Redbox network quickly and efficiently while at the same time removing a prime competitor (Blockbuster) which was leasing those boxes. In contrast, Blockbuster was not too savvy to lease their kiosks instead of own them, and lease them from NCR which sold them to Coinstar! This is savvy and old-fashioned tough business, imho.

      2) Recognizing Verizon as a streaming video partner - where VZ has been struggling - only about 5% or a bit more of their customers are into streaming video. This partnership not only provides a streaming alternative but if bundled with a subscription model it drives more users to the kiosks who will in turn rent more kiosk DVDs.

      3) Holding out for 28 day deal from the studios was gutsy when the studios were insisting on 58 days and forcing other rental partners to go along. Coinstar insisted on 28 days and threatened a "work around" and in the end they wound up with a 28 day deal which kept their offerings current at a good margin.

      4) There was some concern that credit card and other charges were going to eat into their profits but in the earnings preview, Coinstar indicated clearly that the earnings were better because the card charges were lower than expected - not sure why, but it's a good indication that they were aware of this potential problem and apparently did something about it.

      5) Moving into Canada was a logical expansion into an adjacent market and subsequent industry reports suggest that this was and is a promising market for Redbox.

      These are just a FEW examples that sort of jumped out at me, and my business involves innovation strategy.

      • 2 Replies to siteobserver2012
      • Let me add some words of caution Site to temper your excitement with managements strategy & vision respecting: "

        1) Recognizing that acquiring NCR's boxes provided a one-two punch - expanding the Redbox network quickly and efficiently while at the same time removing a prime competitor (Blockbuster) which was leasing those boxes. In contrast, Blockbuster was not too savvy to lease their kiosks instead of own them, and lease them from NCR which sold them to Coinstar! This is savvy and old-fashioned tough business, imho."

        While there is no question but that the purchase took out the kiosk competition, only time will tell whether the price was right. I dont recall what the gross cost per 'box' turned out to be, but the addl cost of conversion still needs to be expensed and Im pretty sure I read something to the effect that less than half of the units were in profitable placements.

        Perhaps the 'elimination of the competition' alone justifies the cost, but we really wont know this for several qtrs till we see what these locations net to the bottom line.

        I like the 'partnering' with VZ, but its way too early to say whether being the minority partner in streaming will be a profitable use of capital. The field is arguably already competitive with a clear leader, nflx and a few deep pocket entries, hulu, amzn, twm and of course Appl & its itunes store.

        alpha

      • But how is this vision "innovative" with regard to the future? Point by point:

        "Recognizing that acquiring NCR's boxes provided a one-two punch... removing a prime competitor (Blockbuster) which was leasing those boxes."

        They saw a great opportunity. But that's now in the past. I'm focusing on future innovation to grow the business in order to survive.

        "Recognizing Verizon as a streaming video partner... This partnership not only provides a streaming alternative but if bundled with a subscription model it drives more users to the kiosks who will in turn rent more kiosk DVDs."

        Ok, at least here's a look into the future. Coinstar had no choice but to partner with an existing content aggregator player. However, I disagree with your conclusion about driving more people to kiosks. The old-fashion physical DVD kiosk market will be dead very soon. Most people want to stream, not drive four times to pick up and return a DVD rental.

        "Holding out for 28 day deal from the studios was gutsy..."
        That was gutsy.

        "There was some concern that credit card and other charges were going to eat into their profits... but... earnings were better because the card charges were lower than expected."

        Have to offer credit card payment.

        "Moving into Canada was a logical expansion into an adjacent market and subsequent industry reports suggest that this was and is a promising market for Redbox."

        Have to find new markets in which to grow. This has to be a "logical" part of their strategy. Good luck and thanks for sharing thoughts.

    • Sometimes it's better to be lucky than good.

 
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