Coinstar, Redbox Goes Private After Acquisition Of Parent Company Spelling End Of DVD Kiosks


The reported $1.6 billion Outerwall acquisition by Apollo Global Management will mean that dying Redbox goes private after the deal is final. The move breathed new life into its parent company’s stock which went through the roof on Monday. Outerwall, the company best known for Coinstar and Redbox kiosks, saw its stock climb 11 percent after the news that private equity firm Apollo Global Management will buy Bellevue, Washington-based Outerwall for $52 per share. Both companies announced the news Monday, reports The Seattle Times, and the deal includes the debt and an impaired business model.

Redbox currently has 60,000 kiosks and employs 2,670 people worldwide. The company made $2.2 billion in 2015 and saw 137.7 million rentals in the first quarter; 35.7 million less than this time last year, and posted $421.5 million in revenue in the first quarter; a 19 percent decrease from 2015’s first quarter revenue. All-in-all, Outerwall posted $535.9 million in revenue and a $38.5 million profit.

Engaged Capital, an activist investor group that owns 14.6 percent of Outerwall’s shares, has been trying to influence such a move for years. Redbox has struggled in recent years trying to compete with the streaming services of Netflix, Hulu, and Amazon Prime and was forced to shut down its Redbox Instant streaming service almost two years ago. Andy Hargreaves, a senior research analyst at Pacific Crest Securities noted that DVDs will soon be as archaic as 8-track tapes because they have been replaced with newer technological innovations. Hargreaves believes that it has taken DVDs longer to become obsolete; however, the end is coming.

[Photo by Damian Dovarganes/AP Images]

“Typically, it takes a few years for the new format to sort of gain critical demand, then the old format starts declining. First, the decline is moderate, then it accelerates. It usually doesn’t stop until the old format is dead.”

After Outerwall announced it was pulling its Redbox DVD rentals kiosks out of Canada, Erik Prusch was brought in as the new CEO and he conveyed via email that the acquisition means Outerwall can continue “to execute on our strategy.”

“Notably, today is possible only because of the hard work and dedication of our valued employees here in the Puget Sound region and across the country. We share a common vision to serve and delight our customers and look forward to working with Apollo in the months and years ahead.”

Apollo Global Management partner David Sambur also issued a statement regarding the acquisition.

“Outerwall is a dynamic customer-focused business that delivers superior kiosk experiences that delight consumers and generate value for its retailer partners. We look forward to working with Outerwall’s talented and dedicated team to continue the business’s strong heritage of growth and innovation.”

Outerwall has not disclosed what will happen to its existing employees, but spokeswoman Susan Johnston says that Redbox is putting its hat back into digital streaming and is now testing a video-on-demand service.


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Michael Pachter, an analyst at Wedbush Securities, says that Outerwall has tried various formats including sandwich vending machines, gift-card exchanges, ticket-purchasing with dismal results, and it was time to “put them out of their misery.” Coinstar, the coin exchange kiosk, is the original and it is still a revenue generator, although the DVD rental kiosk Redbox accounts for 79 percent of Outerwall’s revenue, according to the Sun Sentinel.

Outerwall closed at $46.91 on Friday, and Apollo’s purchase price gives shareholders an 11 percent increase in their stocks and a 51 percent increase since the report that Apollo was interested in Outerwall was announced March 14. Outerwall announces its second-quarter earnings Thursday. It appears that Redbox DVD kiosks are in danger of disappearing entirely soon than later, but Coinstar will remain visible for the foreseeable future.

[Image via Shutterstock]

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