Redbox Digital Not Ready Yet

16 Feb, 2011 By: Chris Tribbey

A hoped-for announcement from Redbox on a digital strategy didn’t materialize Feb. 16 during an investors’ event held by parent company Coinstar.

Analysts had speculated Redbox could use the conference to announce a partner for a streaming subscription service, possibly Walmart or Amazon. Instead, Coinstar CEO Paul Davis and Redbox president Mitch Lowe assured investors that the company would have a digital offering up and running later this year, and noted that negotiations with more than one party were ongoing. One option would be to combine online streaming with DVD rentals at kiosks, they noted.

“We have been talking about it for a while. We’re convinced our brand can expand into this space,” Davis said. “We could have moved a lot quicker a few months ago if we decided to do this on our own. We made a decision not to [do that] because the price was prohibitive.”

Ahead of the event, analysts with Merriman Capital in New York wrote: “We continue to believe that both Walmart and Amazon represent the best potential digital partners for Redbox. Our edge continues to go to Walmart due to the large number of kiosks within those stores [that will help to drive traffic] and Walmart's knowledge of the non-credit card consumer [a market that Redbox has not penetrated].”

Shares of Coinstar were down 39 cents to $43.30 at the close of market Feb. 16.

In other news, Coinstar announced Feb. 16 that it would buy back $50 million worth of common stock from Morgan Stanley & Co. Inc.