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How Much Longer Can Physical Media Hold On?

  +Follow July 30, 2013 8:56AM
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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.


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Results for OUTR
Dave Neville
23 Sep 14 08:47:36
Can the iPhone 6 Be the Boost Outerwall, Inc. Needs? ($AAPL, $OUTR): http://t.co/xY6j3TQJeG via @themotleyfool
Daniel Plata
22 Sep 14 20:57:12
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Dick Sowa
22 Sep 14 19:53:26
Variety: "Studio Renewals Could Hurt Redbox, says Analyst" ex Warner exec Mark Horak now at Redbox will help: http://t.co/rxsMvduAjS $OUTR
Aaron Schryver
22 Sep 14 16:38:51
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Ryan Loftis
22 Sep 14 16:25:18
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Jenise Embleton
22 Sep 14 16:24:07
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Celine Garofalo
22 Sep 14 16:23:09
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
ajaygolmalgobisharma
22 Sep 14 16:21:44
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Sam Reinap
22 Sep 14 16:20:59
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Dipikav
22 Sep 14 16:18:54
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
The 'Batch' Bugle
22 Sep 14 16:18:54
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Rachel Donovan
22 Sep 14 16:18:21
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Connor Odom
22 Sep 14 16:17:36
RT @Variety: Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Variety
22 Sep 14 16:17:25
Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/5RWmGBwJaY $OUTR
Andrew Wallenstein
22 Sep 14 16:17:25
Studio Deal Renewals Could Hurt Redbox, Analyst Warns http://t.co/eQHbxKkYPh $OUTR
Victor E Villagomez
22 Sep 14 13:26:59
Its been a massacre today for $OUTR and I'm hurting. But ppl will show haters what's up. Rent all the movies! Bahh I blame Hollywood...
Victor E Villagomez
22 Sep 14 10:47:40
"@TradeIdeasQuant: $OUTR - http://t.co/fyU0NrRoRh - Might need a medic...we have a bleeder - Running down: -1.37 in 3 minutes 39 seconds"
US Banking News
22 Sep 14 09:45:32
Outerwall Downgraded by B. Riley to Sell $OUTR http://t.co/pQHLIXwiB3
Ticker Report
22 Sep 14 08:17:02
B. Riley Lowers Outerwall to Sell $OUTR http://t.co/xiO8MdLLNv
WKRB News
22 Sep 14 08:15:37
Outerwall Downgraded to Sell at B. Riley $OUTR http://t.co/ve1fUNMj5G
strader55
22 Sep 14 08:06:03
nlightn: $OUTR,...Differing views on Outerwall from Wall Street http://t.co/KSG5ut146U
Tradespoon
22 Sep 14 07:50:06
B Riley downgrades Outerwall $OUTR to Sell
Perfor Mance
22 Sep 14 07:22:32
Option Millionaires: nlightn: $OUTR,...Differing views on Outerwall from Wall Street http://t.co/07hPN4s6ks
The Fly
22 Sep 14 07:17:39
$OUTR Outerwall's Redbox in the spotlight after competing analyst notes: Full Story http://t.co/ySqWxuUyAv
The Fly
22 Sep 14 07:16:13
$ACT $AET $AUXL $CRR $CRZBY $CNQR $DRC $FINL $GNCMA $INVN $LVS $LNN $MPEL $OUTR $PEG $RLGY $RBC $SBMRY $SABA $... http://t.co/QcF7oJMpdz
NASDAQ
22 Sep 14 07:15:21
$OUTR - Outerwall Announces #KioskSelfie Sweepstakes in the Pacific Northwest http://t.co/1rRZolIW10
4-traders.com
22 Sep 14 07:15:02
Outerwall : Announces #KioskSelfie Sweepstakes in the Pacific Northwest http://t.co/VTI04mA64k $OUTR
MarketCurrents
22 Sep 14 07:06:34
Differing views on Outerwall from Wall Street http://t.co/nIP9VorH1w $OUTR
4-traders.com
22 Sep 14 06:15:32
Outerwall : Commits to Collecting Two Million Pounds of Mobile Devices to Help Combat Surging E-Waste Crisis http://t.co/9KDacL0lQ8 $OUTR
NASDAQ
22 Sep 14 06:10:46
$OUTR - Outerwall Commits to Collecting Two Million Pounds of Mobile Devices to Help Combat Surging E-Waste http://t.co/E8n17h5OtD
US Stock Ratings
22 Sep 14 05:17:02
B. Riley & Co. downgrades $OUTR from Neutral to Sell, target price from $54.0 to $47.0 http://t.co/bEqvP8LpYx
Briefing.com
22 Sep 14 05:07:51
$OUTR: B. Riley & Co. cuts to Sell
SIAnalystWire
22 Sep 14 04:21:22
Outerwall $OUTR Survey Shows 'Slow Bleed' Versus 'Fall Off a Cliff' - Piper Jaffray http://t.co/Y5QfKZxI27
Media Sentiment
22 Sep 14 03:59:49
$OUTR received a new alert. Find out why at http://t.co/5udYd0Ofs6 #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 39
SIAnalystWire
22 Sep 14 03:58:09
B. Riley Downgrades Outerwall Inc. $OUTR to Sell http://t.co/omA9aV93dL
4-traders.com
22 Sep 14 03:30:08
Outerwall : Chief Financial Officer Galen C. Smith Named to Puget Sound Business Journal '40 Under 40' List http://t.co/xMNrSOPDN2 $OUTR
LIFE.IS.GOOD.
20 Sep 14 16:45:01
I would buy $OUTR for a quick bounce off the 50sma, but watch for that head and shoulders pattern and get back out if it doesn't break 62.49
4-traders.com
19 Sep 14 13:00:02
Outerwall : Chief Financial Officer Galen C. Smith Named to Puget Sound Business Journal "40 Under 40" List http://t.co/a2hYxG3UNF $OUTR
NASDAQ
19 Sep 14 12:59:05
$OUTR - Outerwall's Chief Financial Officer Galen C. Smith Named to Puget Sound Business Journal "40 Under 40 http://t.co/SkxQfK2YCS
iHangout
18 Sep 14 01:37:30
http://t.co/l4qmOlz0qf chartguy89: Stock Charts: OUTR 60.08 Stock Charts $OUTR Outerwall Inc. http://t.co/Eu23TwGLZJ
Investors Hangout
18 Sep 14 01:34:35
chartguy89: OUTR 60.08 Stock Charts $OUTR Outerwall Inc. http://t.co/Fnt0yqjnQK
Investors Hangout
18 Sep 14 01:34:34
chartguy89: OUTR 60.08 Stock Charts $OUTR Outerwall Inc. http://t.co/6atYwhZ7y7
chartguy89
18 Sep 14 01:30:13
OUTR 60.08 Stock Charts $OUTR Outerwall Inc. (NASDAQ) Last Updated: 09/18/2014 03:30:20 OUTR Stock Chart - 1 M http://t.co/9oXtnF4fLI
Alexander Morris
17 Sep 14 11:13:03
$OUTR: Exc 1DyHIGH=59.80, hits:3, ch:+0.5%, tf:38, LowFlt[16.1M], HiPctSht[35%:10d], DyVol:225T:0.9x:0.4x, DyRng:1.9%:1.4x:0.9x
Alpha Maven Alerts
16 Sep 14 13:13:13
$OUTR, Positive, Yesterday, SD +2.06, #NASDAQ #Industrials
David Tuzzolino
16 Sep 14 06:40:12
Cos w/low EV/EBITDA hard to find. http://t.co/CIBARl2Br6 Screen:EV/EBITDA<5 & m cap<$2 b. Interesting names: $TTWO $AAN $RCII $DF $OUTR $WTI
Analyst Ratings
16 Sep 14 06:09:52
Get the latest news and updates for $OUTR $QURE $CBPX $LADR $TLMR automatically with ARN Daily http://t.co/nSJuDsYidj
Fred J. Damsen
16 Sep 14 03:26:52
#motleyfool #specialreport 12 stocks for '15: $apo $axl $cveo $dcom $dpz $msci $outr $pnc $stmp $veev $xoom $xpo I have no positions in any
Day Trade Alerts
15 Sep 14 08:19:07
via #AlertTrade SHORT Seller Alert $OUTR - OUTERWALL INC #ShortSeller #Stocks http://t.co/VS8RO1bzXJ
				
				
  +Follow July 30, 2013 8:56AM
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