logo  
Sign in or Register

Already a member?

Sign in

Or sign in with your account on:

Not a member yet?

Register
    

How Much Longer Can Physical Media Hold On?

  +Follow July 30, 2013 8:56AM
Share:
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.

DVDs

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.

Books

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.  

CDs

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.


Liked What You Read? Join Equities.com as a contributor and get eyeballs on your content FOR FREE!

Results for OUTR
ValueWalk
24 Oct 14 11:46:15
Sahm Adrangi Of Kerrisdale Is Bullish On SSNC And CTSH http://t.co/MB5JP3s32E $SSNC $CTSH $OUTR $HD $NFLX
FinancialJuice
24 Oct 14 10:28:21
Charter Bridges Brian Zied likes Outerwall $OUTR, at the Ira Sohn Canada conference #stocks
stockblaster14
24 Oct 14 08:14:58
Outerwall Inc (OUTR) 56.66 $OUTR Latin Business Association Honors ecoATM; Presented 2014 Green Business of th http://t.co/Ilov8r7Tgf
4-traders.com
24 Oct 14 06:05:08
Outerwall : Latin Business Association Honors ecoATM; Presented 2014 Green Business of the Year Award at 38... http://t.co/aLEiJauBZb $OUTR
NASDAQ
24 Oct 14 06:03:07
$OUTR - Latin Business Association Honors ecoATM; Presented 2014 Green Business of the Year Award at 38th http://t.co/gwQfq8strq
4-traders.com
24 Oct 14 05:50:05
Outerwall : Redbox Play Pass Gives Customers a New Way to Earn Free Movie Nights http://t.co/3YopvB7mLh $OUTR
Sam Sa
23 Oct 14 14:57:03
$AMZN video slowdown a positive for $OUTR? #graspingatstraws #stillunderwater
4-traders.com
23 Oct 14 13:35:06
Outerwall : Redbox : Launches Its First National Loyalty Program http://t.co/jQ8yKADzQl $OUTR
Penny Stock Secret
23 Oct 14 13:13:36
The Hottest Way to Make Millions From Stock Market.Click HERE http://t.co/AJZWTGD3tb .. $FAST $OUTR $EROC
John Morgan
23 Oct 14 10:14:23
Here's my new Street Authority piece on Redbox owner Outerwall $OUTR -- an unloved low-tech #stock with potential. http://t.co/k5sHPYknlY
4-traders.com
22 Oct 14 13:10:55
OUTERWALL : Termination of a Material Definitive Agreement (form 8-K) http://t.co/xhCDZiFCj7 $OUTR
NASDAQ
22 Oct 14 13:10:26
$OUTR - Current Report Filing (8-k) http://t.co/yT7YD7QmbM
Instrumental Data
22 Oct 14 13:08:21
OUTERWALL INC $OUTR 8-K now available
Victor E Villagomez
21 Oct 14 12:17:39
$OUTR The naysayers may be very wrong
NASDAQ
21 Oct 14 12:16:25
$OUTR - Statement of Changes in Beneficial Ownership (4) http://t.co/3Gj0GpAak5
TLT
20 Oct 14 06:18:47
Bearish looks... $JCOM $CRI $PLCE $MDT $OMI $PCG $AGU $CBOE $FOSL $OUTR Many more... will list more as day goes on
				
				
  +Follow July 30, 2013 8:56AM
Share:

Comments

 

blog comments powered by Disqus

About us

Equities.com is the most advanced interactive online social ecosystem for the financial industry, serving as a resource center and next-generation communication platform that connects self-directed investors with public issuers, market experts, and professional service providers and vendors. Registered members can leverage our exclusive proprietary research tools such as the Small-Cap Stars, which outperformed 90% of all small-cap mutual funds, and robust do-it-yourself E.V.A. research reports. The Equities.com Issuer Dashboard is the ideal tool to communicate and manage investor awareness campaigns to the investment community, as well as to access valuable resources to help your company grow.

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