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Coinstar Licensing Redbox Abroad

7 Dec, 2010 By: Erik Gruenwedel

Coinstar Inc. has begun licensing its Redbox kiosk brand and business model to third parties through a pilot program in the United Kingdom.

Speaking Dec. 7 at an investor event in Los Angeles, Coinstar CFO Scott Di Valerio said the nascent program currently has a partner in the United Kingdom and the jury is still out whether to expand it or grow the business internally.

“We are seeing how the licensing model works and we’ll continue to take a look at whether we should license or build out in other countries over the next several years,” Di Valerio said.

The CFO reiterated that previously discussed efforts to expand game rentals to 5,000 kiosks remain in the testing phase, and a final decision regarding overall expansion of games across the entire network is forthcoming.

“The criteria we have with the game team is that they have to return as much or higher than the standard-definition disc slot they would be taking up,” Di Valerio said. “They compete as does Blu-ray with standard-def in order to get slotting in the kiosk.”

He said a Redbox kiosk has 630 disc slots, of which about 10 to 15 slots are occupied by video games that rent for $2 per day. Games incorporate additional considerations regarding quantity of titles in platforms (Xbox, PlayStation, Wii) to carry.

“We are continuing to learn whether that slotting needs to be higher, lower and how do you make a good marriage between game rentals and DVD rentals,” Di Valerio said. “We are still working through that.”

The CFO said Redbox will have 4,000 dual retail locations among its 30,000 kiosks in operation by the end of the year. Di Valerio said dual locations lend themselves to a higher percentage of game titles, coupled with the fact that gamers increasingly are interested in trying games before buying them.

Finally, Di Valerio said Coinstar remains in talks with partners for a streaming business model that is predicated on the Redbox brand, points of presence to consumers and relationships with the studios. He said the streaming business will also be an opportunity to increase the utilization and lifespan of the kiosk.

“We’ve been pretty clear that we are not going to talk about whether it is going to be a subscription versus à la carte because we are in the middle of detailed discussions,” he said. “It will be a streaming solution and is not contemplated to be something downloaded at the kiosk on a thumb drive or flash drive.”

Di Valerio said 60% of Redbox users have downloaded a TV program or movie, and 90% have broadband connectivity.

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