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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.

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Results for OUTR
Option Runners
1 Aug 15 14:34:59
Free monthly watch list for August $AAPL, $CF, $DEO, $DF, $FFIV, $KIM, $LULU, $OUTR, $PII, $TIF > http://t.co/TTcPsJEjXb
US Consumer News
1 Aug 15 14:20:15
Outerwall's neutral rating reiterated at B. Riley. $70.00 PT. http://t.co/oOPG8j96tz $OUTR #OUTR
1 Aug 15 14:15:26
Outerwall's neutral rating reiterated at B. Riley. $70.00 PT. http://t.co/bXzkeCnIo0 $OUTR #OUTR
1 Aug 15 14:15:04
Outerwall Inc. Reiterated Rating by B. Riley & Co. (Ranked 62nd) to Neutral with 70 PT $OUTR #OUTR http://t.co/ZRnANEP7HD
1 Aug 15 13:32:28
Zacks Downgrades Outerwall to Hold $OUTR http://t.co/9j1UScX6Gz
Clark Joseph Kent
1 Aug 15 08:25:00
1 Aug 15 05:46:59
$OUTR shorts the day after, 16.6 days at 466800 avg volume, none covered very bearish ( with a bounce )
1 Aug 15 04:32:39
$OUTR technical alerts: Expansion Pivot Sell Setup, Expansion Breakdown, New Downtrend, Volume Sur... http://t.co/HjcIrlI4jb
Richard Muller
1 Aug 15 00:18:35
Stock Indexes End Flat To Down, Though Small Caps, IBD 50 Rise http://t.co/DEdEL6ClYz #IBDNews via @IBDinvestors $OUTR $HBI $ELLI $MOH
Small Cap Strategist
31 Jul 15 18:20:31
Small-cap stocks with strong volume declines, Fri Jul 31st - $TMST $OUTR $CRAY $OPY $FSS $OMCL - More: http://t.co/1znvSOIJVT - #smallcap
The Daily Dividend
31 Jul 15 17:07:05
$OUTR is one of biggest losers #stocks today. read more: http://t.co/usRsYLb0Fu
31 Jul 15 16:20:35
Ticker Report
31 Jul 15 15:12:20
Outerwall Inc to Issue Quarterly Dividend of $0.30 $OUTR http://t.co/dln8mnYAoM
Dakota Financial
31 Jul 15 15:10:03
Outerwall Inc to Issue Quarterly Dividend of $0.30 $OUTR http://t.co/RKQuo9S95N
31 Jul 15 15:00:56
Scan results - Fell Below 50 DMA today: $SUSQ $HBI $RLGY $LNKD $GIL $OUTR $LEG $BBT $STX $IBKR ... http://t.co/fnNBKYNKCb
Consumer News
31 Jul 15 14:38:22
Outerwall announces quarterly dividend of $0.30. Payable on 9/15/2015. 1.70% Yield. http://t.co/FEogCtfOqH $OUTR #OUTR
US Banking News
31 Jul 15 14:38:22
Outerwall announces quarterly dividend of $0.30. Payable on 9/15/2015. 1.70% Yield. http://t.co/4lamvYOeP2 $OUTR #OUTR
31 Jul 15 14:32:07
Going to enjoy the short interest #s on $OUTR tonight. Avg volume before today was 435k with 17.8 days to cover. Bounce then $57?
iStock Market
31 Jul 15 13:17:00
RT @ProfitTradeRoom: 20 Biggest Losers today $EYEG $RADA $OCN $QLGC $SZYM $OCLS $ASPS $LINE $DGI $KEG $ROVI $INT $TAL $VVUS $OUTR $SGY http…
Profit Trade Room
31 Jul 15 13:15:52
20 Biggest Losers today $EYEG $RADA $OCN $QLGC $SZYM $OCLS $ASPS $LINE $DGI $KEG $ROVI $INT $TAL $VVUS $OUTR $SGY http://t.co/0W3O6fUyGU
Stocks On The Move
31 Jul 15 12:58:13
Outerwall dives 13.4% as DVD rentals fall; new CEO starts http://t.co/s7prKTkbL1 $OUTR
Breaking News
31 Jul 15 12:58:13
Outerwall dives 13.4% as DVD rentals fall; new CEO starts http://t.co/u8JGsTUL0C $OUTR
Sleek Money
31 Jul 15 10:50:52
Outerwall $OUTR Issues Earnings Results, Beats Expectations By $0.46 EPS http://t.co/NMFCQZqZiP
C Colb$
31 Jul 15 10:18:50
@TJReazor $OUTR......#earningsfail ...sell rules coming in handy, Noram!
31 Jul 15 10:13:52
NewLink Rising http://t.co/IVjXdj1Q13 #IBDEditorials via @IBDinvestors $XOM $CVX $PFE $EXPE $AMGN $^IXIC $^GSPC $^DJI $UHS $NLNK $MRK $OUTR
Dan Mirkin
31 Jul 15 09:58:35
RT @davemabe: Here's my list: $EXPE, $FEYE, $FLR, $GPRO, $HBI, $LNKD, $MDVN, $MOH, $OUTR, $RCL, $RNG, $SKYW, $SYNA, $YRCW, $ZLTQ powered by…
Stock Analysis
31 Jul 15 09:21:30
Outerwall trades lower following mixed Q2; in-line FY15 guidance $OUTR. Trading about 13.4% lower this afternoon following the company’s
31 Jul 15 08:59:57
Outerwall trades lower following mixed Q2; in-line FY15 guidance http://t.co/ImnOaJLUhZ $OUTR
OMG!! BestTweetsEver
31 Jul 15 08:51:42
RT @whey2muscle: Stocks Open Mixed Expedia, Amgen, NewLink Rising http://t.co/APi56tCu5O $XOM $CVX $PFE $EXPE $AMGN $^IXIC $^GSPC $^DJI $UH…
31 Jul 15 08:39:36
RT @whey2muscle: Stocks Open Mixed Expedia, Amgen, NewLink Rising http://t.co/APi56tCu5O $XOM $CVX $PFE $EXPE $AMGN $^IXIC $^GSPC $^DJI $UH…
31 Jul 15 08:38:17
Stocks Open Mixed Expedia, Amgen, NewLink Rising http://t.co/APi56tCu5O $XOM $CVX $PFE $EXPE $AMGN $^IXIC $^GSPC $^DJI $UHS $NLNK $MRK $OUTR
Shiraz Lakhi
31 Jul 15 08:27:44
Volume Spike Screener: Top 9 CONSUMER #Stocks Trading DOWN On Strong Volume Spike $HBI $LUB $OUTR $GIL ++ Full List: http://t.co/sqKNAz8MJ6
31 Jul 15 08:13:29
Morning #Movers 7-31-2015: + $AVOL $COLM $ELLI $KWR | - $OCN $INT $LINE $OUTR $DGI http://t.co/TGvaoVTnG6 #investing
Sleek Money
31 Jul 15 07:35:49
Outerwall Downgraded to Hold at Zacks $OUTR http://t.co/2SPmIiwqnG
Dave Mabe
31 Jul 15 07:29:04
Here's my list: $EXPE, $FEYE, $FLR, $GPRO, $HBI, $LNKD, $MDVN, $MOH, $OUTR, $RCL, $RNG, $SKYW, $SYNA, $YRCW, $ZLTQ powered by @TradeIdeas1
Large Void Bot
31 Jul 15 06:40:06
In Play: $QLGC, $YRCW, $OMCL, $OUTR, $LINE, $LSCC, $CPSI, $ASPS High Uncertainty: $AVOL, $ZLTQ, $FRGI
Rob Smith
31 Jul 15 06:21:44
31 Jul 15 05:57:29
Why OUTR Is DOWN In Premarket Trading http://t.co/4cEONFaq4E $OUTR
Mr. S
31 Jul 15 05:44:51
RT @OpenOutcrier: $OUTR (-8.5% pre) Outerwall reports 2Q loss http://t.co/94iTucz6lP
Open Outcrier
31 Jul 15 05:43:32
$OUTR (-8.5% pre) Outerwall reports 2Q loss http://t.co/94iTucz6lP
Pristine Trading
31 Jul 15 05:27:59
31 Jul 15 04:33:32
$OUTR received a new alert. Find out why at http://t.co/rRtKVALqb5 #stocks #daytrading #trading #mkt #NYSE #NAS… http://t.co/XG5hVFJGig
31 Jul 15 04:27:50
$OUTR received a new alert. Find out why at http://t.co/rRtKVALqb5 #stocks #daytrading #trading #mkt #NYSE #NAS… http://t.co/Csk7miIhta
Media Sentiment
31 Jul 15 04:19:49
$OUTR received a new alert. Find out why at http://t.co/nZwqReM0tj #stocks #daytrading #trading #mkt #NYSE #NASDAQ #markets 73
Consumer Stocks
31 Jul 15 04:19:27
Outerwall Is An Excellent Short Squeeze Play Due To A Rapidly Shrinking Float http://t.co/QOZrNYdR9M $AZO $OUTR
Long & Short Ideas
31 Jul 15 04:19:26
Outerwall Is An Excellent Short Squeeze Play Due To A Rapidly Shrinking Float http://t.co/2tAFFmTTaD $AZO $OUTR
Seeking Alpha
31 Jul 15 04:19:26
Outerwall Is An Excellent Short Squeeze Play Due To A Rapidly Shrinking Float http://t.co/SB4AgQITi0 $AZO $OUTR
Bits & Pieces 112814
30 Jul 15 23:49:41
$OUTR -10% a/h. Reports 2Q loss vs profit from same period last yr. http://t.co/JKWSZjAlBy
Clark Joseph Kent
30 Jul 15 23:40:22
After-Hours Buzz $AMGN $BRCM $DLR $EA $EXPE $LNKD $WU $TPX $FEYE $OUTR http://t.co/I2N0pPT6r2
30 Jul 15 23:30:59
$OUTR Earnings result is already out. Check out historical price reaction after ER. http://t.co/kRs8jzb2MD
  +Follow July 30, 2013 8:56AM



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