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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

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Results for OUTR
Kelli Jo Kuntzman
27 Nov 15 07:17:37
RT @RatingsNetwork: Get the latest news and updates for $PETX $PE $COTY $RNA $OUTR automatically with MarketBeat Daily https://t.co/nSJuDsY…
27 Nov 15 07:17:36
Get the latest news and updates for $PETX $PE $COTY $RNA $OUTR automatically with MarketBeat Daily https://t.co/nSJuDsYidj
McGinnis Eadmund
26 Nov 15 17:20:44
Just bought 5500 shares of $outr at this level ha fingers crossed.
25 Nov 15 22:58:11
Black Friday $SALE on #stockmarket. Cash-rich, 5.7 EV/EBITDA, $60M stock buyback plan in Q4. Read: https://t.co/qM8kTQH7RQ $RMD $TRLA $OUTR
25 Nov 15 13:23:06
$OUTR: New Insider Transaction on OUTR by President, ecoATM: https://t.co/mZ36vUjccE
Insider Alerts
25 Nov 15 13:22:14
NEW insider transaction on $OUTR reported a moment ago: https://t.co/FMbAVw9lxg
25 Nov 15 12:08:32
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
25 Nov 15 11:17:02
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
Breaking News Now
25 Nov 15 10:21:13
$OUTR: Growth Stock Watch: Outerwall Inc. (NASDAQ:OUTR): https://t.co/NjnG0JiY33
24 Nov 15 13:20:10
$OUTR: Notable Session Mover: Outerwall Inc. (NASDAQ:OUTR): https://t.co/gK8ZzFZxsc
24 Nov 15 09:52:38
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
23 Nov 15 19:35:02
$OUTR: Wall Street analysts bullish on OUTR's earnings growth: https://t.co/IxxJe9nVm2 https://t.co/Rm3KCPvBAJ
US Banking News
23 Nov 15 19:19:22
Outerwall Shares Down 3.1% $OUTR https://t.co/oTikFcgR7p
The Legacy News
23 Nov 15 19:11:29
Outerwall Shares Down 3.1% $OUTR https://t.co/NQOWN1XE9G
Breaking News Now
23 Nov 15 15:43:13
$OUTR: Brokerages Anticipate Outerwall to Post $2.06 Earnings Per Share …: https://t.co/oTeFigkevn
23 Nov 15 15:19:32
$71,000 in ONE TRADE!! By Follwing Their Signals More Info Here https://t.co/8WvnrVmkBS .. $FAST $OUTR $EROC
23 Nov 15 15:03:21
Scan results - Hammer Candlestick today: $VEEV $CVS $NAT $OII $OUTR $RP $TWX $ORAN ... https://t.co/O4rHwsyLcm
23 Nov 15 14:14:33
RT @thebrentadamson: Share count reduction from FY2012 for 49 models uploaded so far...https://t.co/VZhBVn52d5 $OUTR $VIAB $M $FOSL $ABG $A…
23 Nov 15 14:14:06
RT @thebrentadamson: A quick FCF Yield screener https://t.co/OpeyyDWJeY $CAT $FOSL $FXCM $M $OUTR $SORL $VIAB $VIA
23 Nov 15 12:35:01
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
23 Nov 15 12:33:10
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
23 Nov 15 12:18:05
thebrentadamson: Share count reduction from FY2012 for 49 models uploaded so far...https://t.co/ixHnyZtZuj $OUTR $VIAB $M $FOSL $ABG $AAPL …
Brent Adamson
23 Nov 15 12:16:47
Share count reduction from FY2012 for 49 models uploaded so far...https://t.co/VZhBVn52d5 $OUTR $VIAB $M $FOSL $ABG $AAPL $HOG $CALL $PSX
23 Nov 15 06:25:44
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
Lydia Duncan
23 Nov 15 05:40:43
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
Breaking News
23 Nov 15 03:28:03
$OUTR: An Insider James Gaherity Sold 950 shares of Outerwall Inc …: https://t.co/wPHZKyUYM5
Day Trader 007
22 Nov 15 15:23:57
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
22 Nov 15 13:45:03
OUTR Outerwall Inc. Short Sales https://t.co/42Z0oTTyK4 $OUTR $SPWR $CAT $IYR #OUTR #finance #invest
22 Nov 15 13:37:03
ELNK EarthLink, Inc. Ask Size https://t.co/hSoktBeL2R $ELNK $WYNN $PSX $OUTR #ELNK #pennystocks #stock
22 Nov 15 13:36:33
EBIX https://t.co/KaSDepxFS8, Inc. % Change https://t.co/GQQZgn91cy $EBIX $CAT $OZRK $OUTR #EBIX #stockmarket #share
22 Nov 15 12:52:38
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
Breaking News Now
22 Nov 15 12:31:02
$OUTR: Company Shares of Outerwall Inc. (NASDAQ:OUTR) Rally 6.53%: https://t.co/vDrraSbuVE
Catalyst Trader
22 Nov 15 11:42:33
H. J.
22 Nov 15 11:16:06
RT @KevinBCook: $AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https:…
Brent Adamson
22 Nov 15 11:03:46
A quick FCF Yield screener https://t.co/OpeyyDWJeY $CAT $FOSL $FXCM $M $OUTR $SORL $VIAB $VIA
22 Nov 15 11:01:22
We calculated 63-day Expected Return of $OUTR for you: 12.51% https://t.co/UyMlRumv8q
22 Nov 15 10:51:22
Unicorn Bay rating for $OUTR is 3.80 out of 5. https://t.co/sNdP4yQZcW
22 Nov 15 10:20:22
We calculated 21-day Expected Return of $OUTR for you: 10.71% https://t.co/UyMlRumv8q
Warren of Wall St
22 Nov 15 09:59:51
$OUTR trading at a 32.0% discount for a reason? https://t.co/D4HtLarg05 https://t.co/TodhDjO2lQ
Kevin Brent Cook
22 Nov 15 08:16:24
$AMBA Goldman's potential SHORT-SQUEEZE watch list: $GPRO $FIT $LULU $SCTY $DV $ZIOP $GME $OUTR $Z $SUNE $FOSL $GRUB https://t.co/VyG8huxni5
Luis A
22 Nov 15 06:51:06
@fundiescapital Home Alone will probably turn this thing around $OUTR https://t.co/gNyvzT0HFI
21 Nov 15 18:11:02
$OUTR: Wall Street analysts bullish on OUTR's earnings growth: https://t.co/IxxJe9nVm2 https://t.co/PcRziVflZa
20 Nov 15 11:44:33
OUTR Outerwall Inc. % Change https://t.co/CcMemTN8NX $OUTR $SSO $LOW $UNG #OUTR #invest #stockmarket
20 Nov 15 11:36:54
IHNewsDesk: AAPL Apple, Inc. Day High https://t.co/fpLai5B1sM $AAPL $HSU.TO $OUTR $CSCO #AAPL #stock #invest
IH News Desk
20 Nov 15 11:32:35
AAPL Apple, Inc. Day High https://t.co/xjEiRzulhe $AAPL $HSU.TO $OUTR $CSCO #AAPL #stock #invest
19 Nov 15 15:08:31
19 Nov 15 13:04:01
PIRS DD 4 investors.Read here: https://t.co/vD9rNW2f06 $JOEZ $OUTR $HIG $TINY $LAMR $MMC $MLR $EVC
19 Nov 15 10:31:26
Right now OUTR is number 225 for the largest percentage gain out of 243 stocks. $OUTR OUTR is up +5.77% in the https://t.co/yVsUyJJ7gi
19 Nov 15 09:09:20
RT @PatientValue101: $sune $chk $outr note to self: stop buying shit
19 Nov 15 09:00:22
$sune $chk $outr note to self: stop buying shit
  +Follow July 30, 2013 8:56AM



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