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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.

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Results for OUTR
17 Dec 14 22:00:07
All-Time Highs: $OUTR $ADBE $MHLD $TSCO $RH $ISIS $ESRT $GPK $DERM $PCG $BDC $BMS $WST $PZZA $BXP http://t.co/Vv2VEnpBuv #stocks #analyst
Stock Signaling
17 Dec 14 21:31:08
Yesterday's All-Time Highs: $DOC $TUBE $OUTR $MOH $OCR $ZLTQ $TJX $ADBE $REXR $JACK $TSCO $JAH $UPS $HSNI $RH http://t.co/S9oPUZ8PN3 #stocks
17 Dec 14 21:00:10
Annual Highs: $DF $OUTR $MTSN $ANGO $DECK $TNK $ADBE $PFE $GPT $HWAY $IRC $MHLD $EVC $PLD $RH http://t.co/TRx9EnjwT5 #analyst #spy #finance
17 Dec 14 14:18:57
$ECIG buyout target of $0.50. 400% upside. Positive EBITDA and $200MM revenue in 2015 $HBI $OUTR $WLK traders read: http://t.co/xi3978GuDs
17 Dec 14 13:14:57
OUTR -1.79% Stock Charts $OUTR Outerwall Inc. (NASDAQ) Last Updated: 12/17/2014 15:14:55 OUTR Stock Chart - 1 http://t.co/t7VEJrqA1k
Asif Suria
17 Dec 14 12:01:46
@PhilipEtienne @LDrogen Good point. Yet Redbox, Netflix and Amazon prime continue to do well. $NFLX $AMZN $OUTR
17 Dec 14 10:00:06
All-Time Highs: $OUTR $ADBE $MHLD $TSCO $RH $ISIS $ESRT $GPK $DERM $PCG $BDC $BMS $WST $PZZA $BXP http://t.co/TRx9EnjwT5 #swingtrading #spy
Alysia Sarkisian
17 Dec 14 09:25:53
RT @SeekingAlpha: Outerwall: Positioned To Be The Next Retail Buyout With 33% Upside http://t.co/qgr9p7IY8k $OUTR
Seeking Alpha
17 Dec 14 09:19:04
Outerwall: Positioned To Be The Next Retail Buyout With 33% Upside http://t.co/qgr9p7IY8k $OUTR
Anmol Singh
17 Dec 14 09:08:53
$OUTR looks like a swing long, strong stock in a weak market
17 Dec 14 09:00:10
Annual Highs: $OUTR $MTSN $ANGO $DECK $TNK $ADBE $PFE $GPT $HWAY $IRC $MHLD $EVC $PLD $RH $ISIS http://t.co/Vv2VEnpBuv #stocks #wallstreet
Scott Hall
17 Dec 14 08:42:42
$OUTR coin co. & $CZR have the same biz model. Idiots put $1 in their machines to get $0.90 back out. At least with $CZR you can hit jackpot
16 Dec 14 22:00:07
All-Time Highs: $OUTR $ADBE $MHLD $TSCO $RH $ISIS $ESRT $GPK $DERM $PCG $BDC $BMS $WST $PZZA $BXP http://t.co/Vv2VEnpBuv #spy #stockpicks
Stock Signaling
16 Dec 14 21:31:08
Yesterday's All-Time Highs: $TUBE $OUTR $MOH $OCR $ZLTQ $TJX $ADBE $REXR $JACK $TSCO $JAH $UPS $HSNI $RH $ISIS http://t.co/S9oPUZ8PN3 #stock
16 Dec 14 21:00:11
Annual Highs: $OUTR $MTSN $ANGO $DECK $TNK $ADBE $PFE $GPT $HWAY $IRC $MHLD $EVC $PLD $RH $ISIS http://t.co/Vv2VEnpBuv #analyst #nyse #mkt
16 Dec 14 15:07:06
Scan results - Stochastic Sell Signal today: $RWT $WAG $DG $OUTR $HA $IMPV $ED $AZO $FTNT $RCL ... http://t.co/elgTWcH48n
16 Dec 14 15:02:22
Scan results - New 52 Week High today: $CVS $JCOM $FDS $SPLS $SCG $WM $PEB $CHSP $BMS $OUTR ... http://t.co/2yOTO7YOiS
Analyst Ratings
16 Dec 14 12:31:46
Get the latest news and updates for $PETX $PE $COTY $RNA $OUTR automatically with ARN Daily http://t.co/nSJuDtP5Bv
Paul R. La Monica
16 Dec 14 12:00:50
Drugs. (But no cigarettes!) Food. DVD rentals. Beer. $CVS, $KR, Redbox parent $OUTR & $SAM are among the few stocks at all-time highs today.
16 Dec 14 10:00:06
All-Time Highs: $OUTR $ADBE $MHLD $TSCO $RH $ISIS $ESRT $GPK $DERM $PCG $BDC $BMS $WST $PZZA $BXP http://t.co/TRx9EnjwT5 #finance #trading
16 Dec 14 09:00:10
Annual Highs: $OUTR $MTSN $ANGO $DECK $TNK $ADBE $PFE $GPT $HWAY $IRC $MHLD $EVC $PLD $RH $ISIS http://t.co/TRx9EnjwT5 #investing #finance
Counter Hedge
16 Dec 14 07:57:55
30% short float and it's breaking out to higher highs. $OUTR #squeeze
16 Dec 14 07:06:42
$outr hitting all time highs http://t.co/eodsgpdfWS
16 Dec 14 02:58:51
Target Hit Huge Profits What is Next $SPY $FIVE $LULU $OUTR $PCLN: http://t.co/86VeDHwOZ0 via @YouTube
15 Dec 14 22:00:06
All-Time Highs: $OUTR $ADBE $MHLD $TSCO $RH $ISIS $ESRT $GPK $DERM $PCG $BDC $BMS $WST $PZZA $BXP http://t.co/Vv2VEnpBuv #analyst #markets
15 Dec 14 21:00:09
Annual Highs: $OUTR $MTSN $ANGO $DECK $TNK $ADBE $PFE $GPT $HWAY $IRC $MHLD $EVC $PLD $RH $ISIS http://t.co/Vv2VEnpBuv #nyse #analytics
15 Dec 14 16:54:54
Huge List Alert Tomorrow $SPY $FIVE $LULU $OUTR $PCLN: http://t.co/UFJT9HYHWE via @YouTube
News Box
15 Dec 14 16:33:02
$OUTR: Outerwall Sets New 52-Week High at $74.47 (OUTR) http://t.co/MbcaZEz3D7 http://t.co/9xZDZwJaDI
Anmol Singh
15 Dec 14 15:32:19
$OUTR Strong stock in a weak market. Looks good to continue higher http://t.co/WDVlS1SNW9
15 Dec 14 15:00:34
Play with the pros working for you $SPY $FIVE $LULU $OUTR $PCLN: http://t.co/UFJT9HYHWE via @YouTube
15 Dec 14 13:28:30
MUST WATCH!!! Target Hit Huge Profits What is Next $SPY $FIVE $LULU $OUTR $PCLN https://t.co/KbxkQ9ufMY
15 Dec 14 13:28:14
MUST WATCH! Target Hit Huge Profits What is Next $SPY $FIVE $LULU $OUTR $PCLN https://t.co/SVgqnjVssT
15 Dec 14 13:25:05
Target Hit Huge Profits What is Next $SPY $FIVE $LULU $OUTR $PCLN: http://t.co/TXrQ6O6vyk via @YouTube
15 Dec 14 13:24:04
Target Hit Huge Profits What is Next $SPY $FIVE $LULU $OUTR $PCLN: http://t.co/UFJT9HYHWE via @YouTube
15 Dec 14 03:30:03
Outerwall : Electronics recycling company pursuing LEED Gold Certification, furthering sustainability effor... http://t.co/C3pf1GnIu7 $OUTR
14 Dec 14 15:37:18
Price alerts set for $OUTR, $MRGE, $QLYS, $RDWR, $RP, $SABR >> daily charts >> http://t.co/Exbj0I6gTx
12 Dec 14 20:55:48
Is It Time to Roll the Closing Credits on the DVD? http://t.co/ufS2jZGzHf via @daily_finance $OUTR $NFLX $OUTR
12 Dec 14 13:35:28
Is It Time to Roll the Closing Credits on the DVD? http://t.co/IInnwNYami via @daily_finance $OUTR $NFLX $OUTR
12 Dec 14 11:25:21
RT @1nvestor: Outerwall (Redbox) looks primed for a B/O. I'm amazed. $OUTR
Derald Muniz
12 Dec 14 11:17:42
Outerwall (Redbox) looks primed for a B/O. I'm amazed. $OUTR
12 Dec 14 08:02:02
$OUTR - ecoATM Extends Commitment to San Diego's Innovation Economy with New Office and Additional Jobs http://t.co/F4l0fx7gO2
12 Dec 14 06:55:22
Outerwall Inc (OUTR:NASDAQ) formed bullish "Continuation Diamond" chart pattern http://t.co/Rj7bso9xiI $OUTR
Kenneth Roberts
11 Dec 14 12:14:17
RT @PhilipvanDoorn: 10 retailers with the best sales growth this year http://t.co/w7m7dl37Zk $AAP $OUTR $SIG $AMZN @MarketWatch
Philip van Doorn
11 Dec 14 12:07:17
10 retailers with the best sales growth this year http://t.co/w7m7dl37Zk $AAP $OUTR $SIG $AMZN @MarketWatch
11 Dec 14 11:14:03
bull flag signalen #aandelen http://t.co/ZkTHv97JEG $ONE $HSP $OUTR
Evan Medeiros
11 Dec 14 07:52:05
$OUTR breaking out of this recent range resistance 71.50 and on route to all time highs
Sam Sa
11 Dec 14 07:48:24
$OUTR ripping
11 Dec 14 07:05:45
Potential Intraday Runners | http://t.co/N9q28mUC0z $DDD, $SCTY, $GLUU, $CLDX, $TWI, $EMES, $GOGO, $WDAY, $OUTR
11 Dec 14 06:00:06
Outerwall : Redbox pushing freebies in Canada as it bets on more life in DVD rental business http://t.co/Ep3FnFRrRq $OUTR
Bret Kenwell
10 Dec 14 16:43:00
The Revival of #Redbox: Why Video Rentals Are Far From Dead http://t.co/M42U2UFc5E via @TheStreet $OUTR
  +Follow July 30, 2013 8:56AM



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