Coinstar’s Redbox Works on Subscription Film Streaming

Coinstar Inc.’s Redbox film-rental division is working to develop a subscription streaming service, setting up potential competition with Netflix Inc. and Hulu LLC.

The Bellevue, Washington-based company is closing in on a choice of an online partner, Chief Executive Officer Paul Davis said in a presentation to analysts today in San Francisco. Nothing is set, he said.

The comments from Davis and Mitch Lowe, president of the 30,000-kiosk Redbox rental business, clarify plans in the works since last year. The online service would be combined in some way with physical DVD rentals, they said. Coinstar said in July it was developing an Internet strategy, without specifying the model. In October, Redbox said it planned a partnership with an existing digital player.

“We could have moved a lot quicker quite a few months ago had we decided to do this on our own,” Davis said today. “We made a conscious decision not to do it on our own because the price tag was prohibitive.”

Coinstar expects to start streaming services this year, Davis said. Netflix and Hulu offer subscription-based plans, charging users a monthly fee to watch movies and TV shows.

Amazon.com Inc. and Wal-Mart Stores Inc. are among the vendors offering online films a la carte. Amazon plans a subscription service, the Financial Times and others have reported.

Source: RedBox via Bloomberg

A Redbox Automated Retail LLC kiosk is installed at a McDonald's. Close

A Redbox Automated Retail LLC kiosk is installed at a McDonald's.

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Source: RedBox via Bloomberg

A Redbox Automated Retail LLC kiosk is installed at a McDonald's.

‘Lot of Players’

“We went out and talked to a lot of players in the space,” Davis said on the conference call. “We started very broad and we’ve been narrowing.”

The stock has fallen 23 percent this year as results and forecasts have missed analysts’ estimates. That is in part because Coinstar faces a 28-day delay in getting new releases from studios including Comcast Corp.’s Universal Pictures, News Corp.’s Fox and Time Warner Inc.’s Warner Bros. The company is refining its methods for predicting demand, Lowe said.

Coinstar announced preliminary fourth-quarter results on Jan. 13 that were below analysts’ estimates. The company’s first-quarter forecast announced on Feb. 3 also was below analysts’ predictions.

Coinstar fell 39 cents to $43.30 at 4 p.m. New York time in Nasdaq Stock Market trading.

Separately, the Los Angeles Times reported today that Walt Disney Co. raised the price it charges for DVDs sold to Redbox to as much as $17.99 for new releases.

Marci Maule, a Coinstar spokeswoman, said the company recently amended its agreement with Burbank, California-based Disney. She declined to comment on the terms. Paul Roeder, a spokesman for Disney, declined to comment.

To contact the reporter on this story: Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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