With Verizon, a Coinstar Is Reborn

Coverage Type: analysis
Verizon Communications, 140 West St, New York, NY, 10007, United States

February 6 was a telling day in home entertainment. Two ambitious players bought into the video-streaming business and one left its DVD division on the curb.

Telecommunications giant Verizon Communications broke ranks with rivals by announcing a video-streaming partnership with Coinstar, which operates Redbox DVD kiosks. Both companies want a piece of streaming online video, whose pioneer Netflix threatens to steal Verizon's pay-TV customers and users of Redbox. Separately, vending-machine company NCR sold its DVD kiosks and related assets to Coinstar after buying them just over two years ago. Who comes out on top? Verizon, which has a 65% stake in the streaming deal, looks unlikely to get much out of it anytime soon. Redbox has millions of customers already using its kiosks in nearly 30,000 locations -- plus the thousands more it will get from NCR. As users gradually shift to streaming video, Redbox can try to migrate those to its streaming service. But Redbox has a casual, rather than monthly subscription, relationship with customers. With Netflix's unlimited streaming priced at $8 a month, Redbox will feel pressure to offer an ultracheap deal to get attention. The lesson for investors is to follow the money. While Coinstar's DVD business should keep it afloat for a while, its future will be decided in the fiercely competitive online world.


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