Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?



How Much Longer Can Physical Media Hold On?

  +Follow July 30, 2013 8:56AM
Tickers Mentioned:

On July Outerwall Inc. ($OUTR), formerly Coinstar, Inc posted extremely disappointing earnings for the second quarter of 2013. . The shortfall wasn’t attributable to the namesake Coinstar change-to-cash machines, but rather the company’s DVD rental kiosk subsidiary, Redbox. First quarter earnings were even worse, with a 58 percent plunge in earnings. This crash coincided with the company’s name change, and a shift in focus away from physical media. Following the disappointing Q2 earnings report, the stock dropped over 13 percent.

The company is working on transitioning into other arenas, like kiosks that dispense coffee, but the sagging profits of their flagship Redbox business points to one undeniable trend: physical media is on its way out. Across the board, physical retailers are losing out to their digital counterparts.


Redbox provided a less costly alternative to traditional rental outlets like Blockbuster, but they still couldn’t claw their way to profitability. On the surface, it would seem the company is doing well, as their numbers rise while Netflix Inc's (NFLX) physical media division withers. While Netflix's DVD business dropped 475,00 subscribers to hit 7.1 million in Q2 2013, sales rose for Redbox, with a 4.1 percent uptick. But this couldn’t offset rapid expansion. Redbox found that people are checking out fewer moves from kiosks, and for a shorter amount of time, further driving down profits.

Netflix isn't batting an eye. Their streaming business tacked on 675,000 subscribers to hit 29.8 million total. As streaming now accounts for over four times as many subscribers than mail digital is their undeniable bread and butter now.


Borders went the way of the dodo in 2011. The remaining mega-bookstore Barnes and Noble Inc. (BKS) saw the writing on the wall and decided to try to get into the e-reader game. The move into hardware was a risky one, and it didn’t pay off: the company’s Nook has so far failed to take off.

While Nook was nowhere near as popular as Amazon’s (AMZN) Kindle, The big question is whether consumers really want an e-reader at all, when the preference for hardware favors tablets made by Samsung, Google Inc (GOOG) , and Apple Inc (AAPL) . And Barnes and Noble has practically zero chance of ever competing with those tech giants.

In Q2 2013 the company reported a net loss of $119 million, double the previous quarter.

Video Games

Video game seller GameStop Corp (GME) got some good news on June 20 when Microsoft  Corp (MSFT) announced they would relax rules for using previously owned games on the Xbox system. It was a capper on an uptick that had seen the company regains form. GameStop hit its high of 64.41 on December 17, 2007, and then crashed down to almost $21 a share by the end of 2008.

But since then, the retailer has exploded. It can’t be ignored that GameStop stock has surged this year, and is up a whopping 78.49 percent on the year. This can be attributed to two factors: one, Xbox’s backtracking on a previous commitment to curbing used-game sales and allowing freer trade of physical media; and the recession pushing more people into buying used games.

But despite the uptick, sales of physical media overall are dwindling for the company. The end of their 2012 fiscal year on January 2013 saw them report a drop in overall sales of 7 percent, while mobile and digital sales were up 21.2 percent.

The company cited a “tough video game market,” and had previously reported they were shuttering 200 stores.  


Perhaps no sector of physical media has gotten the press music has, as it was the first sector to experience significant online streaming and piracy. But Napster isn't what put Tower Records out of business; it was a general shift to digital that the physical music companies were too slow to pick up on. Again, Apple picked up the slack where physical retailers didn't, as their iTunes capitalized on the switch to digital.

Interestingly, some music retailers have been able to turn things around by profiting off one thing that definitely can't be transferred into digital: real estate. Trans World Entertainment (TWMC) , which owns the chain f.y.e, made a land deal in South Florida that netted the company a $22 million dollar profit. That same year, holiday sales dropped 17 percent from the year prior.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer

Signup for our daily newsletter and get our best articles emailed right to you!

Results for OUTR
12 Oct 15 13:44:03
JBEM Bio picks. Make $$$$. Join/Read here: https://t.co/wZhLK4QXda $OUTR $OVBC $OXLC $OXM $OZM $P $PAAS $PAH $PATK $PBIP
12 Oct 15 12:50:32
Outerwall Cut to “Sell” at Zacks $OUTR http://t.co/XXvKekqPN9
Stock Trade Alerts
12 Oct 15 07:55:08
SHORT Seller Alert $OUTR - OUTERWALL INC #ShortSeller #Stocks ~ via #AlertTrade
12 Oct 15 01:04:44
This Service Made 20,000% Gains In the Last Month! Subscribe Here http://t.co/n4FmW1UTLN .. $FAST $OUTR $EROC
Breaking News
11 Oct 15 08:59:02
$OUTR: Outerwall Inc. (NASDAQ:OUTR) Analyst Rating Update: http://t.co/w8H1ey114b
Consumer Stocks
11 Oct 15 01:46:06
Outerwall's 29% Price Drop - Temporary Cyclical Downturn Or Permanent Secular Decline? http://t.co/ls5GaAz3Lr $OUTR
Long & Short Ideas
11 Oct 15 01:46:05
Outerwall's 29% Price Drop - Temporary Cyclical Downturn Or Permanent Secular Decline? http://t.co/rhKsiHo4LV $OUTR
Seeking Alpha
11 Oct 15 01:46:05
Outerwall's 29% Price Drop - Temporary Cyclical Downturn Or Permanent Secular Decline? http://t.co/ZjG9JSNXLv $OUTR
Consumer News
10 Oct 15 20:20:26
Outerwall Lowered to Sell at Zacks $OUTR http://t.co/m0k28ayucW #acn
10 Oct 15 10:20:05
$OUTR: Stock in Focus – Outerwall Inc. (NASDAQ:OUTR): http://t.co/f8YetYdgI3
Alexander Morris
9 Oct 15 10:00:35
$OUTR: At 1WkHIGH=60.57, hits:1, Rng:7%, ch:+0.6%, 0phNearHi, PrvCHi, allTFs+, lowFlt:15M, HiPctSht[42%:13d], DyVol:140T:0.3x:0.3x
8 Oct 15 19:17:55
JBEM picks.Huge gains in past.Ongoing play CALA RXII.Join here: https://t.co/wZhLK4QXda $OSUR $OTIC $OTIV $OUTR $OVAS $OVLY $OXFD $OXGN
Syed Waqas Nabi
8 Oct 15 12:00:09
A bullish Big MAC (Bullish) has occurred at 2:30 PM Oct 08 at $59.97 on Outerwall Inc (OUTR) $OUTR
8 Oct 15 08:42:26
JBEM pick RXII big catalyst on way.Read here: https://t.co/OKriElClyL $OSUR $OTIC $OTIV $OUTR $OVAS $OVLY $OXFD $OXGN
8 Oct 15 06:45:31
Outerwall Downgraded by Zacks to “Sell” $OUTR http://t.co/DCyNvUWu5o
7 Oct 15 23:46:02
$OUTR: Zacks Short Term Rating on Outerwall Inc. (NASDAQ:OUTR): http://t.co/GXfh8vYbJx
Syed Waqas Nabi
7 Oct 15 12:00:18
A bullish Big MAC (Bullish) has occurred at 2:30 PM Oct 07 at $60.19 on Outerwall Inc (OUTR) $OUTR
7 Oct 15 10:37:07
$OUTR: Quarterly Earnings Watch – Outerwall Inc. (NASDAQ:OUTR): http://t.co/11kPnFQVoZ
Penny Stock Secret
7 Oct 15 01:52:57
$71,000 in ONE TRADE!! By Follwing Their Signals More Info Here http://t.co/SVqoMkJ7r9 .. $FAST $OUTR $EROC
6 Oct 15 18:01:02
$OUTR: Wall Street analysts bullish on OUTR's earnings growth: http://t.co/IxxJe9nVm2 http://t.co/PmHOxegwp5
6 Oct 15 10:30:12
Outerwall Given Buy Rating at Northland Securities $OUTR http://t.co/zDeFz6OebR
6 Oct 15 09:28:00
Motiwala Capital – Q3 2015 Letter To Investors http://t.co/54NjHpIYfc $GME $CNRD $GCG $HNNA $OUTR $MNDO http://t.co/0bMGppyWp8
6 Oct 15 01:39:02
$OUTR: Outerwall Inc. (NASDAQ:OUTR) Analyst Price Target: http://t.co/cSNG9PW0Fp
5 Oct 15 11:22:26
Want automatic email alerts for $OUTR $QURE $TW $CBPX $LADR? Subscribe to MarketBeat Daily http://t.co/nSJuDsYidj
Quick Stock Ideas
5 Oct 15 10:22:35
Motiwala Capital - Q3 Letter To Investors http://t.co/9XhGdbZqa0 $HNNA $VC $MNDO $STX $CNRD $DOW $OLN $WDC $OUTR $GME
Seeking Alpha
5 Oct 15 10:22:35
Motiwala Capital - Q3 Letter To Investors http://t.co/c99LMzeLzb $HNNA $VC $MNDO $STX $CNRD $DOW $OLN $WDC $OUTR $GME
The Legacy News
5 Oct 15 05:54:17
Northland Securities Trims Outerwall Target Price to $85.00 $OUTR http://t.co/r0iXBAB9ys
4 Oct 15 09:46:02
$OUTR is rated BUY, 41.2% upside by Wall Street analysts based on average ratings/targets http://t.co/LJFQ8jBMs6 http://t.co/zGhkkVx98E
4 Oct 15 09:30:03
$OUTR "Posted by: jhnvtjll" on ADFN InvestorsHub message boards: http://t.co/BpI9uVkiFp
Consumer News
3 Oct 15 20:01:33
Outerwall Given New $85.00 Price Target at Northland Securities $OUTR http://t.co/b5NkFod5sk #acn
3 Oct 15 15:50:20
$OUTR 58.15 Covered at 57.80 (from 60.65)
Sensor Unlimited
3 Oct 15 13:47:37
$OUTR: Earnings of $1.57 Expected in Q3 for Outerwall Inc. (NASDAQ:OUTR): http://t.co/FRVZtP6haB… http://t.co/ztvPX3vpb8
Breaking News
3 Oct 15 13:37:03
$OUTR: Earnings of $1.57 Expected in Q3 for Outerwall Inc. (NASDAQ:OUTR): http://t.co/DdUqiJ0Wmj
  +Follow July 30, 2013 8:56AM



blog comments powered by Disqus

 Today's Must Reads

Market Got You Down?: Here Are Six Hot Stocks

Global Winners and Losers in the Oil Shakeout

This Bull Market is No Stranger to Big Fourth-Quarter Comebacks

When to Sell and When to Rent an Investment Property

Saving the Small-Cap Market


Small-cap stocks offer investors many benefits, ranging from higher growth potential to overlooked value opportuni... in Equities.com's Hangs on LockerDome

About us

Equities.com is an advanced financial data portal and social network designed to connect self-directed investors with the world’s most innovative startup and small cap companies. Through our in-depth coverage of small cap markets, comprehensive research and stock valuation reports, state of the art issuer products, and world class events, Equities.com provides the social tools and insight that drive tomorrow’s investment relationships and opportunities.

Market Data powered by QuoteMedia.
Copyright © QuoteMedia. Data delayed 15 minutes unless otherwise indicated. Terms of Use.

Login or Register