Coinstar, Inc. (NASDAQ:CSTR)
February 27, 2013 11:00 am ET
Rosemary Moothart - Director of Investor Relations
Paul D. Davis - Chief Executive Officer and Director
J. Scott Di Valerio - Chief Financial Officer and Interim President of Redbox Automated Retail LLC
Michael J. Skinner - President of Coin & E-Payment Services
David Veenstra - Corporate Senior Vice President of Strategy & New Ventures
Ronald Bookbinder - The Benchmark Company, LLC, Research Division
Andy Hargreaves - Pacific Crest Securities, Inc., Research Division
Good morning. I'm Rosemary Moothart, and I'd like to welcome you to Coinstar's 2013 Analyst Day. Thank you for joining us here in San Francisco, and thanks to all of you folks who are listening via webcast.
The program today will include presentations by Paul, Scott, Mike Skinner, David Veenstra, Anne Saunders and Galen Smith. Scott will then wrap things up and open up for the Q&A. The presentations and the Q&A are being webcast live and will be archived on our investor relations website. Those of you who are participating by webcast will have an opportunity to submit questions through a link on our site. The slide presentations will be posted completely after the website today -- after the event today, on the website. For those of you in the audience, just a reminder to please turn off your cellphones so we don't have background distraction during the webcast. And also, we'd request that you please keep your badges on and visible during the day.
Today's presentations include non-GAAP financial measures. A reconciliation of non-GAAP to GAAP is included with the materials and also posted on the site.
During the presentations, various remarks that we may make about future expectations, plans and prospects for the company constitute forward-looking statements for purposes of the Safe Harbor provisions under the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those discussed in our most recent Form 10-K and subsequent Forms 10-Q filed with the SEC. Coinstar, Inc., assumes no obligation and does not intend to update these forward-looking statements.
Now we're happy to get started with our CEO, Paul Davis.
Paul D. Davis
All right. Thanks, Rosemary, and welcome, everyone. And I really appreciate everyone taking time out of your schedule to join us today. I wanted to get up in front of each of you and share a few thoughts. From where I sit -- from where I stand today, I am incredibly optimistic and excited about the company and the future ahead.
If you look back 4.5 years ago, we sat down as a team and really picked up the mirror and said, "What is it that we know? What are we good at? And what are our core strengths?" And that was the genesis for us to start focusing on the platform of automated retail. And as a result of that, we ended up getting rid of lots of businesses that we're not at that core, that didn't leverage our strengths, that we weren't making money on, nor did we see an opportunity for us to become in a leadership position.
So since then, we've been working very hard against our 2 core businesses. We've made significant strides in both Redbox and our Coin business. Both Mike and Anne will be sharing with you today some really exciting news and some of the -- sharing with you some of the works that we're doing on most of our core businesses. And David Veenstra will also be talking about some of the exciting things that we're working on. And we have a lot of optimism about the seize [ph] in new businesses that will go into market.
So as we look at automated retail, we look at it through our key constituent sides. We start with: Retailers love this because it gives retailers, who are operating on razor-thin margins an opportunity to take underutilized space in the store. And leveraging our turnkey capabilities, they are able to turn that space into some of the highest-profit producing space in the entire store. Secondarily, they like it because they are able to pull customers from other channels of trade into their stores. So that has become a wonderful combination for us. We have great relationships that we've had for 20 years across multiple channels and that has continued to be a real winning combination for us.
Secondarily, consumers love automated retail because, well, consumers are time starved, they don't have a lot of time on their hands and they're looking for easy solutions but within arm’s reach, so we are where people go every day.
So if you look at where we ended 2012, Galen will come up later and talk about more detail, but really it's really strong performance in both the top line, bottom line, on the balance sheet. If you look at our revenue of $2.2 billion versus even 5 years ago, we've quadrupled the revenue during that 5-year time frame. We've also quadrupled, nearly 4x, the EBITDA. And in EPS, I remember when I first joined, I said, "Is this company ever going to get EPS above $1?" In some years, we have it where it was half of that. And just last year, on core diluted EPS, we had $4.83 and continue to grow. And you've seen the guidance that we talked about for 2013.
We also spend a lot of time and energy as a company focused on, "How do we improve our balance sheet?" And if you look at the ROIC performance: When I first joined, we were low single digits. And we've been able to grow as a team, so an incredible job of growing that to where, within the last year, we ended at 18%. Strong balance sheet, lots of free cash flow enables us to do a lot of things: to invest back in the business, buy back the stock and do all those things that we think really drive shareholder value.
But all of this, quite candidly, is not possible if it weren't for the team. And I'm very, very proud of the team that we have in place across the company. The way we think about it is we -- when we hire people in these key positions, we look for individuals that have 2-level stretch. We don't hire for when -- a few years ago, for a $1 billion dollar company. We were hiring for a $4 billion and $5 billion company. So we only look for people that have been there, done that. They've demonstrated their capabilities of scale. And we also have worked on finding people that -- where innovation is part of their kind of core DNA. The value sets are right. They know how to work together as a team and they're very results oriented. And we've also worked hard on creating a diverse team and have made terrific strides, and I think we are in a wonderful position to take this company to places that is really, really exciting.
And I'm also really, really proud to have Scott Di Valerio to backfill me as CEO. Scott and I have worked side by side the last 3 years. He's been at my side every decision we've made. This guy has incredible strategic capabilities, strong operating chops. He's a results-oriented guy and he knows how to build a team. So I feel like we're in great hands as we think forward. And this team that you're going to see today are incredibly talented and highly capable.
So with that, I'd like to turn it over to Scott. Scott?
J. Scott Di Valerio
Thanks, Paul. I'd really like to thank Paul for all his great leadership of Coinstar over the last 5 years and, in particular, the work we've done over the last 3 years that's been a phenomenal opportunity for myself to work closely with Paul and with the rest of the team. I do think we are well positioned to drive the business and get to where we want to go, in large part because of Paul's great leadership. So thank you, Paul, for everything you've done.
Paul D. Davis
J. Scott Di Valerio
All right, thank you all for coming today. I really appreciate you coming out and letting us spend some time talking about Coinstar and talking about the great opportunity that we have here at Coinstar. And I'm going to spend a few minutes working through some of those things where we think allow us and position us not only to be a leader in the core spot that we are today, but to continue and drive that well past the areas that we look at today and well past the size of the company that we are today and do that in a way that we've always done, which is growing profitably and driving great returns for our shareholders.
So let's just think about 5 numbers as you walk away today from this presentation and from our Analyst Day. It's $4 billion, 3, 6, $16 billion and 20%, and we'll talk about these as we go through the day, but as you -- think about those 5 numbers as you walk away and work through it.
First off, we expect to double the size of the company over the next 5 years to $4 billion plus by 2017. We think were well positioned to do that because there are 3 global trends in particular that really drive and set up for the emergence of automated retail. I think Coinstar is well out ahead of that 22 years ago. They -- the mega trend and the overall trends are coming into that place, which gives us an opportunity to drive much further into spaces where we might not have been before.
We have 6 consumer sectors that we're participating in today that really line up a very strong market for us when we'd look at our core businesses, when we look at our seeds and our strategic investments. And that -- those 6 spots have a sweet spot of $16 billion for automated retail.
The overall addressable market is $85 billion, and I'll talk a little bit about that, where we have a large upside potential. And when you take on adjacencies, that $16 billion, we're up over $20 billion in market opportunity. We've got great opportunity today.
We're a little over $2 billion, and to go to $4 billion in 5 years, we have incredible upside opportunities as we drive through that. And we're going to do that while making structured, disciplined investments in the business growing the top line, the bottom line and return on invested capital up to 20%. And as Paul said 5 years ago, we were in the low single digits, did 18% this year. We're going to continue to drive that up. And we're targeting 20% over the next 5 years and will work hard, as we always do, to try to do it better than that. So this is -- we have great opportunity in this business and great opportunity in this company.
I'm going to spend a little bit about doubling the size of the company. All of you know we are a leader in the automated retail space. And the way we really do that is through bringing innovative products and services to our consumers. And as Paul talked about, we do that by starting with our key constituents, our consumers. Is there a consumer need out there that's not being met that can be met with simplicity, convenience, value and places that people go each and every day?
So our retail partners. There are opportunities to lever our retail partners and over all of our distribution partners. And then how do we focus and do that? Through delighting our consumers and retail partners and then obviously, at the end, our investors and employees by being successful in driving that overall business.
And really, we talk about automated retail. And automated retail is a relationship with our consumers. It's not just a kiosk or retail automation where we automate a particular process or an idea and people go up to it and they do what they need to do and they walk away. We build relationships with our automated retail solutions.
40 million email addresses at Redbox, 5 million text club members. I think we have 5 million email addresses or more at Coin. We'll build communications back and forth, utilizing social networking with all of our businesses. We build a relationship. It's not a one-way street, it's a two-way communication. I kind of liken it to: My mom used to go to the grocery store in the same grocery store around the same time each week because they like the cashier. She liked the cashier that was that grocery store, where people have their Redbox machines that they like to go to because they have a relationship at that store with that Redbox machine. They like to go to certain coin machines that we build this relationship, two-way relationship, with our consumers, and with that, the key difference between automated retail and retail automation as well as our ability to continue to innovate and drive the business.
I mentioned the addressable market. We started off, and in the past, we've talked about $1.3 trillion, $1.4 trillion self-service market that's growing. That's a pretty big number. We also went back and said, "Okay, well, what are automated retail's sweet spot? And how do we get after that in a way that's structured? And then how do our businesses fit within that?" Well, we started even higher up in that and looked at the overall consumer spend, which is $10 trillion, and said, "Okay, what -- that's a really big number. Now let's start paring that down to figure out what we can address and how we can do it. Certainly, it's hard to buy cars or houses through an automated retail solution. Well, we'll think about that someday, but we -- you pull those kind of sectors out that don't make a lot of sense to be able to address through an automated retail space. Then you take a look at our channels, our traditional channels that we play in, whether it be grocery, whether it be mass convenience, drugs, some of our new businesses are moving into malls and office channels. And then you take a look at the 15 largest DMAs because we're not necessarily going to go across the bigger spans, if you want to get into those spaces. And you start working down where is that consumer spend, and that gets you to an $85 billion space set for us to be able to go after.
Then what we did is we took it down even further about and say, "Where -- what spaces do we think can really be addressed in a relatively near term with an automated retail solution?" And that automated retail solution certainly is kiosk-driven, but also then will have adjacencies out to do other things around technology where the kiosk is an entry point but not necessarily the only place where you can deliver these services to. And we bring that down to get to the $16 billion.
So when you think about it, we have a great goal of getting to $4 billion, which is a big number, doubling the size of this company over the next 5 years. So even if we do that, we're around 20%, 25% of the market at that point in time. We have the ability to continue to drive out in other spaces as we go through. So we're very excited about our opportunities in this space and we're very excited about being able to focus and drive the business in that way. And we've done a pretty good job around picking out the right sectors and the right places to go, but as we continue to move forward, we're going to focus around the trends, we're going to focus around these addressable markets, focus around these sectors in order to be able to be more targeted, more efficient and more effective about bringing new products, whether it be innovations in our core business or whether it be brand-new seeds or whether it be strategic investments or acquisitions as we go through.
How are we going to get that close to $2 billion of growth? Half -- roughly half of it is going to come from our core businesses through new innovations in our core businesses and through growth through what their existing business is, whether it be the Redbox business, and tickets and Redbox Instant as well as other items that we're looking at continuously about how do we leverage Redbox's brand of entertainment, value, convenience and simplicity, and Anne's going to talk a bit about all those things that we go through at Coin, then the recently announced PayPal deal, other opportunities at Coin that continue to stretch out what we're doing at our Coin business, as well as there's opportunities and spots and channels that we might not have participated fully in before that can allow us to grow out that Coin business.
And the other half is going to come from our new business ventures. And that's going to be through structured investments. It's going to be through disciplined investments, and it can be both from stuff we've developed internally and evaluated internally, as well as items that we do either through strategic investment or through acquisition as we go through the next 5 years. We feel very good and very confident about our ability to do that and, again, do that with the right level of return to our shareholders.
Now we've done this in the past, certainly, with our internal-driven growth. And through just pure expansion, think about close to 20,000 kiosks in the Coin business, over 40,000 kiosks in the Redbox business, so it's really been about geographic expansion of the footprint. We're evolving to innovations on those platforms. We're evolving to optimizing those networks, which is -- can mean in a number of different things, including moving the kiosks into better places within the stores that they're in today or locations they're in today, as well as repositioning kiosks from underperforming locations to new locations that we think have higher and better purpose. All those things will be focused on trying to drive the business.
We also continue to develop new concepts. And Rubi is one of those, and we'll get to have experienced Rubi after this with some great coffee after the presentations, gift card exchange as well. Again, innovations on new themes: You have all those gold gift cards, you want to turn them in. You want that instant gratification, you got it.
As well as product extension. Redbox Tickets, Anne will talk a bit about that; coin to PayPal, which we announced today, is another one. And it's not just coin to PayPal, it's cash into PayPal as well, which again evolves the Coin business out of just dropping coins to being able to accept cash and bring new services to our consumers whether it be under bank, non-bank and even fee-avoiders as we move through. Talk about moving things in the right locations and drive. And certainly, our focus around great strategic investments and also acquisitions, which I think we've demonstrated with our acquisition of NCR and our partnerships, certainly NCR's Blockbuster Express business and certainly our partnership with Verizon with the Redbox Instant business.
So again, this will be how we focus on our strategy. It's a strategy that we put in place by focusing on automated retail. We're continuing to refine it. We're continuing to learn and continuing to focus by understanding where the market's going in and how it's playing.
Why are we positioned to do well? And why do we think automated retail is the right space to be in? There are 3 global consumer trends that are driving an acceptance by consumers today.
First is increased urbanization. As more people moving back into the cities; more people is moving into what I'd call kind of the sub, not the old suburbs but closed-in suburbs in the city, would put pressure on overall footprint and the ability to deliver services. Automated retail is right in that spot, ready to be able to deliver great things. Think about Redbox. It can be a video store, thousands of square feet, down into 12 square feet. Think about a coin exchange, the coin machines. It's seeing -- you saw it at the other bank, you get the coins, you had to roll, do all those kinds of things. Now you go into a very small footprint. Think about coffee, large, hundreds of square foot to 1,000 square-foot coffee store, now down into a kiosk. Again, being able to deliver great products, high quality, great value in a small footprint is going to be key as you have this increased urbanization.
Technology advancement. That's certainly going to help us in building out kiosks and technology solutions that deliver new and innovative consumer products, but it's also key that consumers are now much more accepting and used to using technology to deliver services. ATMs, we all use ATMs -- or I guess, most of us who use ATMs are -- but frequently we don't even think about going into bank branches unless we have to, something you have to do. But ATMs haven't been around that long. And my parents would never even think -- when they're alive, would never even think about using an ATM because someone's going to steal the money or steal their card or, "How does that work?"
And so instant check-in at the airport. You don't have to go stand in those long lines. Well, there's still long lines that they keep, but people are very used to using technology that deliver services, and technology continues to advance to allow us to bring new and innovative things into the marketplace, like tickets, like PayPal, where several years ago may not have been available or done in a way that's economic because the technology isn't in the place that it needs to be.
And then there's this 24/7 instant gratification. Think about all the cable channels we have. You got 55 ESPNs; you want news, you got news. Again, not too long ago, you had 3 network newses, plus maybe a couple local newses, and they were on at 5:00 and they were off there by 7:00. And that was your news source. Now you get news 24 hours a day. People want to get what they want, when they want it. And automated retail provides that.
Our outdoor kiosks for Redbox, open 24/7. You can get a DVD anytime you want, you don't have to wait to get -- wait for the mail to show up. Coffee, you don't have to wait and stand in long lines. They have coffee at a coffee shop and have a barista make it, you can get it instantly. Coins: You don't have to sit at your house and roll coins for X number of hours to be able to monetize them into an iTunes card or an Amazon.com card or a Starbucks or whatever else you want, or cash to be able to buy groceries.
Instant gratifications. People want it, they want it quick. We can deliver that because we sit in that space between large brick-and-mortar and e-merchants. That's a great opportunity for us, it's a great trend for us to be able to drive through.
And retailers are responding. If you think about -- you don't hear about people expanding the size of their boxes, they're talking about bringing the size of the stores down to be more efficient, more neighborhood stores, more localization as they continue to expand out. Of course, we have the smallest footprint available in the automated retail space, with our kiosk being very small footprints.
Social media, mobile, automation. We're kind of the -- we're the leader in being able to take our kiosks in that relationship and making that a 2-way relationship utilizing, certainly, email, utilizing text and SMS, utilizing Twitter, all kinds of things. I mean -- when the Academy Awards on Sunday, the host made mention of Redbox, we immediately Tweetdeck out some great stuff, then all of a sudden you have a bunch of people talking about Redbox in a positive way, in a good way, off of a comment that a person made on TV. But before, you'd have to wait for the press to get it and all that. We drove the message through our Twitter work as opposed to letting the message drive us, again, and getting our consumers activated and knowing. And who would've thought 3 years ago that, at the Academy Awards, Redbox would've gotten mentioned, and while maybe not mentioned as positively as people would want, as they say in show business, any press is good press and so it's -- at least we're on their minds.
And then certainly, the 24/7 instant gratification, we've talked about this. But the omni-channel retailing is really getting to be important. And when you look at the millenniums (sic) [millennials] and what they really want and how they want to be able to do things is they want to be able to shop online, go to the store and get the products that they shop online for, if it doesn't work, to be able to return it back to that store, and be able to kind of have this cycle to where they are dealing with the store or a brand or a merchant, they don't really care, they don't want to have to do something different whether they shopped online, whether they shopped in the store or how they did it. They wanted a seamless opportunity. And that allows us to deliver some great products to our consumers, and also it really sets up our ability to kind of serve overall needs in these different channels. So we're really excited about the fact that these trends are helping us and will help us continue to drive new products and ideas into the marketplace.
Let's talk a little bit about what we've been doing around the number 6. We have 6 attractive consumer sectors and that -- well, how we talk about the $16 billion sweet spot.
So when we talk about the 6 sectors, it's food and beverage, electronics, entertainment, beauty and CPG, health and money. And you can see kind of how we broke out -- how they break out across the $85 billion and then how they break out across the $16 billion and then where Coinstar, which is the green, how much we have of each of these markets at the end of 2012. So you can see there's incredible opportunity and upside in our businesses and in the sectors.
Now I'd like to tell you that we are very focused and direct and really on top of where we are going when we put and started businesses in these 6 sectors, but it kind of happened. We had great ideas, we went after them, we did them internally, we made strategic investments. And then as we began to work on what's our real total addressable market, what became clear was the 6 sectors we picked had huge opportunity for us and huge upside potential for us. And in fact, we're the best 6 sectors across the work that we did in order to drive our automated retail solutions in and the vision of the company that we have to be able to drive the company overall. Now we have a little more structure, a little more focus around it because of the work that got done. But as you can see, there's huge opportunities. If you look at the food and beverage market, it starts up at $46 billion. We think the automated retail space now is roughly $8 billion. Now that includes things like -- it's really what I'd call time-pressed meal service. So we took -- you take out -- sitting down to eat at the restaurant, you take out -- the QSRs, the way you would sit down and eat. And you kind of work your way down towards really time-pressed meals in the channels that we'll serve a drop [ph], health clubs, those types of things. And you get to an $8 billion opportunity for Crisp Market and for Rubi and in other automated retail solutions that we might drive and do. So there's great, great, great opportunity in these spaces.
What I wanted to spend a bit of time on is that, "You have us a breakdown. And what are we talking about in some of the adjacency?" And we can see in the center is the automated retail sweet spot, which is roughly $16 billion. The adjacent markets, which are things that are very closely in to our solutions today, get us to over $20 billion of opportunity. So there's lots and lots of opportunity we're poised to be able to drive and bring the business in.
Food and beverage, today we're looking at $6 million, $7 billion in that sweet spot. When you look at the adjacent markets, you're looking at $10.9 billion. The adjacent markets include more international, include moving tea into there, include cold beverages, those types of things. If you're thinking about Rubi; if you're thinking about Crisp Market, for example, it does include international there, it would include going from including a dinner day part [ph] versus just the pressed -- time-pressed lunch and breakfast set. So those kinds of things that are very clear in how we step up into those adjacencies and then how we might want to drive the business to those adjacencies as we're successful in where we think the sweet spot might be. So again, very strong opportunities there.
In the money business, you're looking at the traditional coin counting business that we've always talked about. We process $3 billion of coin, it creates close to $300 million of revenue for us. There's another $5 billion, $6 billion, $7 billion out there, there's opportunities there. But then there's also opportunities with gift card exchange, there's opportunities with PayPal and cash, there's opportunities in those areas that drive this overall stake up to where you have $8 billion plus another $4 billion sitting in that opportunity -- $800 million, excuse me, and another $400 million on that opportunity.
And we've always talked about this as well. We're not going to be successful. With all the work we're doing, all the structure and discipline we have, you're not going to be successful on every opportunity that you bring in and bring into the market. But we have a very disciplined approach to going after these businesses and a very disciplined approach about where we make decisions on whether they're successful or not and when we want to drive into going into a full-scale opportunity.
So as you can see, in each of those 6 sectors, we have some very exciting and interesting businesses. Health, there is SoloHealth; beauty, with Sample it!; electronics, with Orango and ecoATM; entertainment, tickets and Redbox and certainly, Star Studio; money, with Coinstar and the gift card exchange; and food and beverage, today with Crisp Market and Rubi. Again, all these are exciting opportunities in those sectors, but we don't believe -- we think we're pretty good at this, but we also know the success rate is very low. But we think we're going to have a lot higher success rates than others because of the discipline we have, the focus we have and our track record of being able to bring great automated retail solutions to market. And that's a fashion of being able to identify the opportunity, understanding your consumers, having a great channel partnership relationship, being able to build the kiosks, being able to deploy them in a rapid fashion and then certainly our field service and ability to drive those businesses from there. So we're in a very, very good position to take advantage across these markets. Things we have in the hopper where, if things don't work out, we have other ones that come in that we'll be able to drive and bring through across these sectors as well.
All of our businesses, whether it be our core businesses and adjacencies on our core businesses, or new products that are coming in or innovations, are all evaluated across key -- what we've determined as key automated retail criteria. The first one is really focused in, and we've been talking a lot about it, is the total addressable market. Is there a consumer need? Is the market attractive enough and have sized enough that it makes sense for us? Can we do it at the right margins? And are we -- do we have a competitive advantage about getting into the marketplace and bringing a product or a service that really addresses the need that a consumer wants that isn't getting addressed in the fashion? And can we do it in a way that's new, innovative, that really is -- I don't like using the word disruptive, but that changes how people interact and get services? When you think about Redbox, we talk about the democratizing DVD rentals. It's about democratizing movies. Many, many people that would never have rented a movie or bought a movie at a store or done a VOD now rent movies on a regular basis and see movies on a regular basis. We expanded our movie partners' footprint of people that can watch their content in a way by having a great price point and being of value, and that's what we will be focused on.
So you have to look -- again, we found that simplicity is key. In it, the offering has to be simple. You have to -- there's got to be a real benefit to having a physical presence. But also the fact that that physical presence is that you can equate that and move that into a relationship and then move that into being able to bring services not just from a physical perspective, but using that as a platform, but also being able to bring things through new, innovative ways as well. And then access to those machines or to the kiosks in a way that are places where people go day in and day out, every week. Over 1.2 billion people walk past our kiosks on a monthly basis. 1.2 billion people walk past; we need to get our conversion rate up. We need to get people to discover and then come after us a lot more. We have a lot of great transactional members. When you start off with 1.2 billion a month, it's not as -- the conversion rate isn't as high as we'd like. So we think there's great opportunities there.
And then certainly, we have to lever when we go through these key things, leveraging our ability to bring something to market in an efficient and effective way, in a way that's going to be successful for our retail partners, successful for our consumers and successful for, obviously, our investors though doing a high-return business as we go through.
Let's talk a little bit about Crisp Market. And that's one of our newer seeds. And I think it's one that's pretty interesting in thinking about how do we get there and how do we think about it. So about 1 year, 1.5 years ago, the team came up and said, "We think there's a great need to bring fresh, high-quality, great-tasting food into an automated retail concept." And we were going to think we ought to focus in the office channel, maybe in the athletic club channel and a few other channels, but we think there's a great opportunity for people that really want prepared, healthy -- not the normal stuff you get out of vending machines but real healthy food that would be good. And we said, well, that's -- "There's a lot of things there. Let's go back and do some work. There's challenges, inventory management, all those kinds of things where people really want it." But we looked and said, "There's a big market there. And in fact, in that food and beverage market, and I mean retail, it's close to $7 billion. Let's spend some time and look after it."
So what do we do? Hey, people like to eat, and they like to eat high-quality food. And they like high-quality food at a great value. And people are pretty busy. I think about when, quite frankly, our office building in Bellevue. We don't have a place to get food. We just don't. You have to get in your car and drive off, or you to have call Jimmy John's, or you have to do bring your lunch from home. There's not an easy place to get food without leaving the facility. And I think about places where I worked before, you'd have one small place to be able to get food close by in between meetings, your half-hour lunch and those kinds of things. And those places always have people in that are working there. It's costs and labor intensive, it's space intensive. And it's not necessarily the greatest experience of food, a lot of it's fried, a lot of it's not very great stuff. So we really went through and said, "Hey, can this really work in an automated retail fashion? Can we build something that makes sense? And will people really want to go for it?" And what that space -- and as I said, it's really about those time-pressed breakfast and lunch day parts work. And it's about -- we take a look at the market and the total addressable market of when you count QSRs and take out fine dining, all that stuff is around $32 billion, $32 billion. So we think where we can go with automated retail is $6.77 billion and that's the total addressable market, that system there. And 50,000 to 70,000 kiosks, nobody should think that we're going to put 50,000 to 70,000 Crisp Market kiosks into the marketplace. They go after those markets. But that's the total addressable market. If the business is cranking and we think we can get there, we'll do it. But with 20% of the time-pressed to-go meals, which is something smaller than 50,000 to 70,000 kiosks, it's a very good, very strong business in the channels that we're talking about. It's a great opportunity in this Crisp Market channel.
Here's the picture of the actual kiosk. We have one in the market today. We did some tests. And we did a test 2 -- about 1 year ago as we started this out in 2 locations with a semi-manned kiosk or attended kiosk, and it just did phenomenal. The response is phenomenal. People really liked it. They liked the freshness of the food, they liked the ability to get it and get it quick. We put this new kiosk, one kiosk in. It's been in for a couple of weeks. It is -- the immediate returns are very, very good. We've done no advertising or awareness that is in the office building; it's in an office building in Chicago. We're getting great throughput and traffic on it. We're working on some things on how we market and drive and think about things a little bit differently. But what's really coming back is we're getting great comments from our -- from the consumers that are interacting with it. They're telling their friends, and we're getting lots of repeat customers and new customers coming in. And they like the selection, they like the freshness, they like the value point. And we'll continue to tweak it.
And certainly it meets the 10 criteria -- or most of the 10 criteria that we set up. And not every business is going to satisfy all 10, but where we're kind of yellow is large deployments and excited channel partners because we're in a new channel, quite frankly, in the office channel. There's 4,500-or-so office buildings around that are kind of targeted areas. We got to work through a lot of the things that you would do because you don't necessarily have one office person that owns 50 to 100 or 200 to 300 buildings that you can negotiate one contract, so there's opportunities there, so this is one of these opportunities we think are quite exciting. And certainly, the consumer proposition coming out of the gate is very, very strong.
Kiosk is -- our new kiosk, it doesn't look like your normal vending machine. It has good quality in the screens, and again, the food has been very -- rated very high from our consumers.
Let's talk a bit about return, the 20%, the fifth number I'd like you to walk away with. And Galen will spend more time on our historical ROIC and kind of where we're going and how we're going to drive that later in his presentation. But we have always been about driving and generating shareholder value at the company.
And I think we've done a pretty good job of doubling the size of the company over the last 3 years. That's doubling or increasing the EPS, significantly increasing cash flow from negative to positive and in driving our ROIC of 18%. It's been a huge driver. And we've done that while investing in our core businesses, the Coin and Redbox business, and putting new innovations in those businesses. We've done that while investing in 6 new automated retail concepts, in fact, 7, because we terminated one; and in making strategic and -- 2 strategic investments, all the while while driving and growing the business. And we're going to continue to do that and leverage our abilities around innovation, around our ability to understand our consumer, our ability to understand the channels that we work in and our ability to work very closely with our partners in order to deliver great solutions to our consumers, which will drive our overall business and certainly allow us to continue to increase and drive all of our return on invested capital to our shareholders. And again, we're targeting a 20% return on invested capital over 5 years. You'll see as you flip a little forward, we're going to get there a little faster than 5 years, as we look at it. That is a clear focus of ours and we will continue to do that for our shareholders.
We also are going to do that and we do this through what we call the shared value structure or shared value approach. On a big one, I think we need to keep the ecosystem healthy. And that's our retailers, that's our partners, that's our consumers because if you don't keep your ecosystems healthy, somebody -- something's sick, and then when it gets sick, and it really does hurt you. But part of that is also the overall environment. In -- we a couple of years ago began a very structured program around shared value and around doing corporate social responsibility. And we don't do it purely because -- and we don't look at it purely because it's a nice thing to do and all of us feel really good about it. We do it because there's great shared value. So we set out a goal that, in 5 years, we wanted to decrease our overall carbon footprint by 15%. We hit that goal in 1 year. How did we do that?
We did things like route optimization at Redbox and at Coin. Now did we do that optimization to save 15% -- completely to save 15% of our carbon footprint? No, we did route optimization because it's the right thing to do for the business, as well as having the outcome of having this significant impact, positive impact, on the overall ecosystem. So what we're able to do is deliver better service to our retail partners, deliver better quality of life for our employees and for the environment around us.
We did the same thing with -- so if we think about how we do our remanufacturing at our chem plants: significant change in how we think about recycling, all that kind of stuff, moved down from having what would be roughly one of the huge large trash cans of waste every month to having one a year. Now at significant reduced cost, because we're recycling a ton of things, we're doing stuff in the right way, again, changing process, just doing the right things, getting the right returns for our overall shareholders and for our overall employees and investors. And we'll continue to do that as we look out into the future and making our investments.
Even our businesses are focused around shared value. Think about our DVD business. We're buying a DVD and we're turning it over several times. So rather than just having people go out and buying and having landfills of DVDs or plastic books [ph], we're recycling that. Coins, the recycling of the coin if you think about the gift card exchange business that we're doing. All those things have shared value in the fact that they're reducing overall waste on the environment but also driving a great business and serving the great consumer needs. And we'll stay focused around that so that we are -- continue to be the leader in automated retail, continue to be a leader in corporate social responsibility, but it's really tied into an overall shared value proposition.
So what I want you to walk away with today is remember these 5 numbers about Coinstar. We are going to double the size of this company to $4 billion in revenue over the next 5 years. We're going to do that because we have some great tailwinds on the 3 global trends driving us and helping move consumers into the areas that we think they're going to go, around increased urbanization, improving overall technology acceptance and the ability to do those, as well as the instant gratification.
We're in 6 great, attractive consumer segments that, from a sweet spot perspective, we have $16 billion of opportunity, $16 billion to $20 billion of opportunity, and an overall $85 billion addressable market. And we're going to do that by structured, disciplined investment approach where we're investing in new innovations in our core businesses, we're investing in new innovations in our C businesses, and we're going to be doing structured acquisitions and strategic investments that can really drive the right level of return on invested capital. We've targeted 20% at the end of 5 years. We're going to build that through the next 5 years.
Excited about this business, excited about the direction. And again, the team that's gotten built up. I have incredible confidence in the team that we built, that we're not only going to drive through what we're focused on today and talking about today, but well past that because the team is focused, it's excited about the business and it knows how to get the job done.
So with that, I appreciate your time. And I'm going to turn it over to Mike Skinner, President of our Coin business.
Michael J. Skinner
Okay, thanks, Pete. Thank you, Scott, and good morning to everyone. I'm Mike Skinner, I'm the President of our Coin line of business and I also manage our new gift card exchange product. And I've been with Coinstar since 2004, and I really appreciate the opportunity today to introduce you to our Coin business, the new gift exchange opportunity, the consumers we serve and the business initiatives that we have in front of us as we look to grow both our top and bottom line.
As we walk through the presentation today, I think you will find that we'll build upon 3 core values. One, that we're focused on building an enduring company. We come to work every day focused on driving -- delighting our customers. And finally, we consistently challenge ourselves to ensure that we're looking to find a better way to approach everything that we do.
Okay. Today, we build value and we're extending the reach of our franchise by helping consumers who have coins and physical cash, convert them into a value that extends its convenience. And it also provides them with a way of using those funds that they may not been -- have easily accessible in the past. If you think about trying to get a dollar bill online, that's a really hard thing for many consumers to do, yet there's a high demand for that. And the core component of what we do is focused on transforming that coin and currency into something that they want.
We're going to have a heck of a time here. For those who follow the Coin business for -- oh, go into the back one.
Today, we're building a business that has that -- a proud business that has a strong history and one that has been built on 20 years of proving that we can bring consumers with products and services that are in incredible demand. We've changed the way that all of the countries that we're in today handle coin. We're involved with the Fed, we're tied in with the mints in those countries, and we are fundamentally changing the way the coin flows through the network.
We've also established an incredible consumer footprint, over 20,000 kiosks in the 4 countries that we operate in today. We've proven that we can consistently draw -- drive strong financial performance and strong cash flows. And we also have proven that we can bring consumers products and services that they value and that our retailers will embrace and support.
As we look at the core components of our business, you'll find that we have a strong presence in the markets that we serve. We've proven that we can take our products and our technology and transcend borders and also transcend different currencies; we're processing 4 different currencies today. We put -- we have a distribution footprint that's within 5 miles of 90% of the U.S. population. And we have a solid and protected technology portfolio that we continue to build upon and to expand.
It all begins with our consumers. We have 5 key categories that we focus on as we think about the coin conversion business. And each -- and we continually run a segmentation study that provides us with insights into who these consumers are. The 3 core segments are where the majority of our revenues come from today, yet they find tremendous potential for growth as we look forward and we think about the total available market but they were -- they are challenging us to bring them new products, new services and new convenience.
The 2 opportunity segments offer tremendous potential. There's $3.6 billion of untouched coin that is finding its way into financial institutions and other ways of being processed that we believe that we can access. And we'll share with you later in the presentation some things that we're doing on the financial institution side to be able to open that opportunity.
We are also beginning to focus on a new category, the gift card exchange category. This is a business that is, we believe, today, $7 billion to $8 billion in size. You would know it by the gift cards that you may have in your wallet, in your purse. It could be in a drawer at home. And these are typically cards that you were given, that comes from a retailer that you may not shop frequently, may not be in a geography that you live in or perhaps you used part of the card but not all of it so you have an unpaid balance that remains on that card. This is a market that continues to grow. Again, we believe it's very large and we think it's very consistent with how we think about the money sector of our business.
As we look at the value of our footprint, we think it's very large, very dynamic. Since our inception, we have converted $34 billion of coin, $3.1 billion of that coming in 2012. Our consumer franchise consists of 45 million consumers. Last year, they completed 77 million transactions. And our kiosks are positioned in very high-traffic areas that reach 35 million consumers every week. As we think about this consumer engagement part of our model, getting the consumer to actually engage with an automated retail device, we're having great success there and we believe that that is shows -- is shown in the fact that, today, after just 2 years, we have 5 million email addresses that the consumers are giving us that allow us to communicate directly with them.
As I mentioned, the financial institution front is one that offers tremendous opportunity. And we believe that we can grow share in this marketplace, and we've made meaningful progress in this area as we look to build relationships with the key financial institutions. But we also are looking at how we can expand and change our kiosk itself to be able to fit the needs of this individual market plays. As we've done that, though, we've also found that it's very important that the financial institution also be strongly committed to the success of this business, as it's very important that they bring their marketing clout along with a unique product and our full service model to the picture to really be able to maximize the potential of this marketplace. And the results that we've seen in our higher-performing financial institutions have been remarkable. We're seeing volumes that are 6x to 9x higher than what we would see in a standard financial institution or in a grocery kiosk, and we're seeing volumes that are 3x to 5x higher. So very high transactions, very high volumes, but it comes with a very unique commitment on the part of the financial institution and the value of our full-service distribution system.
Last year, when we were hit -- were here with you, we talked about the fact that there are 4 key areas that we are focused on as we look to build our business. The first is engaging with our consumer and monetizing that engagement; connecting with the mobile marketplace, including the digital wallet; adding new products and services to the kiosks; and finally, looking for ways that we can continue to build upon our international footprint.
And so we actually started this on February 6, and this is a product that we initially introduced you to 1 year ago and it's a product that we've seen great success. And we're very excited by the partnership that we have with PayPal and the tremendous opportunity that we believe it opens up for both of our companies as we look to expand and take advantage of the growing interest in the digital wallet.
And as we announced this partnership, we've done so in a way that brings 3 very unique product attributes to the consumer that have made it incredibly successful and that we believe differentiates in the marketplace and allow us to garner a large share of the consumer demand in this space. The first is that we allow the consumer to actually log into their PayPal account from the Coinstar kiosk. So essentially, they now have remote access. They do so using their username. They can use a mobile phone number and a password.
Secondly, the Coinstar technology team, along with the PayPal technology team, has built out a very unique solution on the password front. Today, we have a solution that allows us to have a secure interaction with the consumer with their username and password in a kiosk environment that sits in the middle of a store. And that, we think, is very important to the overall success of the product and giving the consumer the confidence that they need to feel comfortable in that transaction. And we're seeing that in our actual results. The consumer feels very comfortable with that solution. And finally, once they've logged in, we provide them with 3 unique opportunities to take advantage of their PayPal account. The first is they can load coin or cash. So for us in the business model, as Scott mentioned, while we've been myopically focused on coins for so many years, we're seeing a growing number of opportunities present themselves in the form of physical bills. A consumer who's cash preferred is not just carrying coin, but they're also carrying bills as well, and in fact, they're trying to find ways to use those bills in a digital environment.
The second part of this product mix is we allow the consumer to deposit those funds either into their account, or they can deposit those funds into account of someone else. So if I have a child that's in college, I have the ability to actually access their PayPal account and load those funds directly into that account from the Coinstar kiosk.
The final part of the product is it allows the consumer to withdraw funds from the PayPal account as well, and we're seeing tremendous demand on this side of it. So the ability to actually easily get the cash in a retail environment from their PayPal account is one of the strongest features that we're seeing in this product. And we believe it really sets the stage for our ability to do more with this and to integrate PayPal into our retailer relationships as we look to get the consumer to use those funds in the retail experience.
As we think about rolling this product out over the coming year, we know from our pilot results this can be very, very important that both PayPal and Coinstar market this product aggressively to our consumers. And to do that together, we've built a joint marketing effort that is supported by both products, both companies, both individually and collectively. And you will see that over the coming weeks. Many of you may have already received an e-mail. If you're a PayPal user, which I'm assuming many of you are, you may have already received an e-mail from PayPal announcing this feature and asking you to come to the kiosk and take advantage of it. We will also be aggressive on the PR and blog front as we start to engage with a newer consumer for us. Not all of these consumers are unbanked, underbanked. Many of them are no different than the folks in this room. My guess is that if I ask -- I know I did this the last time around. We asked for a raise of hands, and majority of the folks in the room had a PayPal account. In fact, we know from our consumer research that 70% of the Coinstar consumers already have a PayPal account. So we're well positioned to take advantage of that.
And we've gotten strong support from our retailer community on this product as they look to be able to build traffic but also to be able to have those funds the PayPal user make -- a lot of their accounts spent in the store.
As we look forward, we believe that there'll be more opportunities on the PayPal front as well. We believe there's going to be a great opportunity to increase the minimum limits within the space. We've started out at the levels we are today, and we expect, in both PayPal and Coinstar, expect to increase those over time, that the adoption of this product grows. We think there's an opportunity to increase -- have the ability to add funds cross border. And finally, we see tremendous opportunities to add this functionality to the growing kiosk network that we have in Canada and our European footprint.
We've also entered into an agreement with Black Hawk. Many of you may know Blackhawk. They're a subsidiary of Safeway. You might know them. It's the large gift card mall racks that you would see in your retail locations. They are the largest provider of consumer financial products and gift cards in the United States, and today, I think they're operating in over 15 countries. So they're very dynamic, very aggressive marketer of financial service products and gift cards. And through one single connection, we now have access to 500 unique content providers. And while we're initially focused on taking advantage of their gift card mall suite, they also open the opportunity for us to add mobile top-up, open loop debit and credit, as well as a growing number of other financial services products as we look to continue to challenge a broader range of consumers and bring more adoption to the Coinstar kiosk.
As I mentioned, we've also begun to target a new space, and this is a really exciting space for us. It's one that we think fit perfectly into the Coin model of transforming something that consumers have into something that they want. Large category, $7 billion to $8 billion of unused gift cards is estimated each year. It's a simple product. We'll introduce this to you at the break when we're at lunch. But you will find that this is a product that's very easy. It's very intuitive for the consumer to get. Instead of having to go online, having to go to Craigslist, having to go through a lot of different steps to be able to unlock the value of that gift card, consumers can easily use a kiosk, simply insert the card, and we'll provide them back a cash voucher that they can process for retail. And they have immediate use of cash. You don't have to send your card away. You don't have to lose time. It's immediate. It's available to you on the spot.
We're using our Blackhawk relations to support this product as well, so they're providing us with access to a large number of their products. They made an acquisition of a company called Cardpool that we have partnered with, and they're providing a core component of the product back into this product. We're in the very early stages of this business. We have just a little over 50 kiosks in the marketplace today. We're seeing tremendous results, meeting all the expectations that we have set for the business. But again, we're early, and we're learning as we go, and we're continuing to modify and make changes in both the model and the technology to ensure that, as we go to rollout, that we will be prepared to meet the demands of this business. And there is a robust demand. We've seen over 150 individual retailers, cards, come into our kiosk network today. So we feel really good about not only just the total value of this business but the broad scope that it offers and the potential that we have to even expand that further as we provide the consumer with more opportunities.
And it's a great business to be partnered within the Coin line of business. There's tremendous synergy here. There's synergy on the brand promise side. We're transforming something that consumers have into something that consumers want. We're taking advantage of an existing kiosk production and deployment system that goes to work every day to support the Coin, Redbox and Rubi lines of businesses today. We're using our Coin field operations and service teams to take care of this business, and so we get great synergy there. The voucher payment system that we're using with Rubi is the patented solution that we use in our Coin business today. We have strong retailer partnerships, as you saw, that are supporting this business and are aligned with us as we look to expand our footprint. And finally, we believe there's a great opportunity within this business model over time to take advantage of the current Coinstar machine from an integration standpoint. So we've seen strong leverage as we look to expand the model from that perspective as well.
As we look through the future, we believe that our businesses are very well positioned for growth and capitalize on the very exciting changes that are going on in the consumer footprint and retail as well. And we think there's going to be tremendous new things that we'll be talking about as we look to the future around mobile top-up and around the developing mobile wallet.
We've set high standards and goals for our business. We believe they're achievable. They're in line with what we're seeing today in the partnership relationships that we put together with PayPal, with Blackhawk, with the opportunities that we see in the financial institution area of the business to penetrate that world in a meaningful way. And as we do so, we will continue to be focused on the 3 things that ultimately will ensure our success: one, create an enduring company; two, ensure we delight our consumers; and finally, make sure that, in everything we do, we're looking to find a better way.
With that, I appreciate the opportunity to introduce you to our Coin business. Thank you.
Thank you, Mike. We're going to take about a 15-minute break now. But I also wanted to let you folks know that Mike mentioned our gift card exchange kiosk, which we've called Alula in the past, and that kiosk, along with the Redbox ticket kiosk and also the latest Rubi kiosk, will be available for informal demonstration during lunch and on until about 2:00 this afternoon for the folks here in San Francisco. So we'll take a break and then welcome you back in just a few minutes. Thanks.
So if everybody can take their seats, we'd like to get started again. Thank you. So our next speaker is going to be David Veenstra. He is our SVP of Business Strategy and New Ventures, and he will give you a business overview of our New Ventures business segment. Welcome, David.
Thanks, Rosemary, and thanks for the time today. I appreciate you guys making the trip out. We always like having the chance to get in front of you and share a bit about the business. Today, of course, I'll be talking about our New Ventures segment. I've been overseeing that business for the past few years. I had a chance to meet a lot of you last year, so it's nice to reconnect some of the names and the faces.
Today, I really want to spend the time talking about 2 things. One is to do a deep dive on our coffee Rubi business, and we'll let you know about the progress that we've been making there. And then two is to do a bit of a snapshot overview on 3 of our other ventures that are not quite as far along in the process as Rubi, but other businesses that we remain really excited about. And those are the 2 things we want to accomplish today, and of course, during Q&A, we're happy to answer questions about the businesses.
So why don't we first just jump right into the Rubi business? As Rosemary and Scott alluded to, you'll get a chance to actually try the coffee, which I think is really important for those of you that are here in the room in San Francisco during the lunch break, so I encourage you to do that. We can actually even comp it, so you don't have to pay the $1 or the $1.50. So there's no hurdle in terms of pricing. And then the second piece is I just think it's a great way to get to know the business and really understand the consumer experience and how the consumer actually interacts. I think you'll be impressed with the concept. But that's really -- this is the new-generation kiosk that you see here that you'll also see when you sample it firsthand. But we'll actually spend a majority of the time on talking about the business and the business progress. So 2 things that you should take away from this piece of the Rubi update or the coffee venture update. One is that we're incredibly excited and enthusiastic about this business, and two, we really believe that we're poised for growth and that we're going to be able to capitalize on the growth that's in front of us. I think that intersection is really important, right? Because you can be really excited about an opportunity and not be ready for growth, or you can be ready for growth but not be excited about the opportunity. We're right at that intersection where we're really excited about, and so I'll share a bit about both of those dimensions as we step through this.
So the first one is this is a key growth engine for the company. We're spending a lot of focus on this business, both from a prioritization standpoint, effort, investment and just bringing the right talent to there on the business. So it is absolutely a priority for us as we think about our growth engine overall but particularly our growth engine in '13.
The second piece here is that consumers really love the product. They're voting with their wallets in the market. You'll see some of the data that we've been seeing in the market about actual results that we're seeing, but we're also -- they're also -- when we have conversations with them through intercept, focus groups, et cetera, they're also telling us why they love the product. And so we'll share a bit on that, but that's one of the reasons we're incredibly enthusiastic.
The other is the retailer interest that we've seen in the business. We'll talk about some of the retail partners that we have engaged in pilots and who we have engaged more broadly in '13 and beyond. But the retailers are really leaning in on this product. It's a great way to bring a turnkey solution to their consumer base.
As we think about beyond the consumer and beyond the retailer, what else did we accomplish in 2013? One of the big wins for the business is actually signing up an exclusive agreement with Seattle's Best Coffee. Many of you obviously know Seattle's Best as a brand. It's a subsidiary of Starbucks, but in addition to the brand it sells, which we're really excited about partnering with the capabilities that brand brings, also the expertise that sits within those 4 walls that has a deep coffee domain expertise, brought together with our operating expertise of the kiosk businesses.
The other piece that we really spent a lot of time in 2012 focused on is what we call here our refined production kiosk. And this is the kiosk -- if you remember Paul and Scott talking about in recent earnings calls, when we said we have some, what I'd call, hiccups in the business, where we really had to take a pause in the business and say, we need to get through some certification challenges and some production challenges. But what that actually gave us, I know it's a bit of a blessing in disguise which allowed us to actually look at the kiosk and say, okay, we have a certification window that we have to go through. What other features should we be making sure that we have in this product so that it's absolutely the right kiosk for the consumer and a kiosk that we feel really confident in the ability to scale quickly? So that's where we spend a lot of focus in 2012, is around the production-ready kiosk. We've made great progress there. Then we actually started to install some of these booths -- excuse me, some of these kiosks in the marketplace. You'll see the one here. We actually have some that are going in this week in the San Francisco area. But we also have them around the country, and we'll talk about some of that.
And so in '13, as we think about growth, we've talked about some of the New Venture growth as a portfolio. The lion's share of that growth, of course, is going to be driven from our Rubi business as we think about '13.
So if we continue to think about this business, the one piece that I think Scott did a nice job of framing up was, "What are the success criteria that makes any of these businesses interesting to us as a company?" And he went through each of these, so I won't go through all that detail again. But each of these businesses, they don't have to hit every dimension. He talked a bit about it with Crisp Market. This is, of course, how we feel about this business as it relates to the Rubi coffee business. But what's interesting here is that it hits on all dimensions. And we can debate whether it's green in every one or green or yellow, and we can do that over coffee potentially. But as we look at this internally, we really say everything is pointed in the right direction for this business, from our enthusiasm to our readiness to its scale. And it's really compelling from the market, the consumer need, from "Is it the right thing to put in a kiosk, being automated, simple and need to be physical?" And then lastly, does it leverage what we're good at as a business in terms of our capabilities as Coinstar?
So just to take a step back and say, "Where are we at today?" Here's where the current business is today. I think what's interesting on this map are a few things. One is, of course, we continue to have increased installations, 80-plus installations in the market today. But more interesting, I think, is the market, the market expansion that we've had. So we're in 5 markets today. What I like about that is that it actually starts to show the national scope of the business. Whenever you start these businesses, you always think that it's going to be a national play, but you don't know until you get the kiosks in the ground and start to see the results coming out of your different pilots. And so we've seen strong results across these 5 markets, and we'll continue to open up new markets as we look into '13. So that's a win for us as we look at sort of proof points around the market.
But the other piece which is really interesting is the folks on this list. I'm not sure if you guys can make all these out. I guess you have a books in front of you. But these are some of our best retail partners and Tier 1 retailers across the board that we're just really excited about piloting with. And so if one of the questions that you're asking yourself, which we ask ourselves, which is once you're ready to go, you're going to have homes to put these in. We feel very confident about that in terms of the placements within our retail partners. So the list, of course, is up here, but some of the biggest names in retail, of course, Walmart, Safeway and Kroger just to name a few, but all great partners and all leaning in on the business as they think about a turnkey solution for our coffee offering.
So that's the retailer piece. If we think about the consumer piece one, by the numbers and then two, a little bit more by the -- more of the subjective side, by the numbers, voting with your wallet, consumers have been doing that. So when we met last year, we actually talked about a target for this business of $12,000 per year. That's what we thought the business was going to be able to deliver. This is actually real results, what we saw in the market in 2012, $12,000 in revenue per year on an annualized basis. And that's made up of 2, obviously, main components. One is how many cups per day. We see that 25 cups per day transacting out of an average machine at $1.30 average ticket. That's how we get to the $12,000 number. So before, it was a target. Now we've actually shown that this is something that we can deliver again in our current pilot portfolio. The second piece is actually just the satisfaction of customers. It's one thing to get them to come once. It's another thing to get them to keep coming back and tell you why they love the product. When we asked them why them love it, they're always focused on 3 things: convenience, value and great taste. So as long as we stay true to those 3 things as we build this business, we think that we're going to have a very successful business in front of us.
As we've built this business, we've actually served 850,000 cups of coffee since the inception. And so every cup of coffee, there's a way for us to learn more about, obviously, consumer preferences but also have the potential to engage with those consumers and learn more about the offering. So that number will exponentially grow as we scale the business here in 2013.
I think the other piece here is that as we think about satisfaction, when we ask our customers and this is through a survey that we had done, "What's your satisfaction with the Rubi experience? Are you satisfied or very satisfied?" And as you can see, 92% of customers said they are satisfied or very satisfied. They're very satisfied. So we're feeling really confident about the business from, "Are they taking out their wallets?" but also "Are they returning, given their satisfaction?"
And then the last piece here is actually a nice piece of the puzzle because what it says is 50% of customers have made a special trip to the retail store because of the coffee kiosk. And what that does for us is a couple of things. Obviously, it shows that we're a habitual part of these consumers' days, which is fantastic. But it also shows that we're able to drive traffic to our retail partner stores. And when we do that, of course, they buy other things and the retail partners love that. So we'll continue to track that metric, but it's a really important piece to the puzzle as we think about this being symbiotic.
If we think about the kiosk itself, again, you'll get a chance to touch and feel it, but what we're doing is we were saying, "How do we take this time and really bring features that are going to be incredibly valuable to the consumer, and how do we bring features that are going to make us better operators?" So on the left-hand side, you'll see things that allow us to be more effective operators. On the right-hand side, you'll see things that are all about making a better consumer experience and helping lift top line.
So the first element that we see here, we've actually increased the capacity of the kiosk 2x from the original-generation kiosk to what we have today. Obviously, one of the benefits of that, you don't run out of stock as often, and so it can go longer without someone needing to visit it. If someone doesn't need to visit it as much, our cost structure goes down. That's obviously a positive when you think about the P&L for the business. So that's been a great win for the business.
The second piece, which we've spoken a bit about, is this automated condiments. So before, consumers who go up and get their coffee, they have to put in their own sugar, their own cream. Now it's all done with the user interface. So user says, I want 1 cream, 2 creams, I want a sweetener, I want a sugar. You customize it right on the screen, and then it puts it in the drink for you. One, consumers love it because it's customizable, but two, it's a lot cleaner, and so we have less of a mess as we think about operating the business, which is a great advancement for the business.
The third piece, again, on the operating side is protection from pilferage. So you wouldn't think that people would want to steal your cups, but sometimes that's the case. And so what we saw was with our first generation, we didn't have the cups secure. In the second generation, you can see on the bottom there, it's a little door with a flap in the middle, that actually opens and closes to protect the cups until you've actually purchased a cup of coffee. And so that's actually helped reduce our cost by getting rid of some of that pilferage, which is another leverage point.
On the right-hand side are things that we've done to try to create better top line or better consumer experiences. You'll see that we've actually introduced the 16-ounce drink size. So before, it was just 12. Now we got 12 and 16. As you can imagine, that suggests that there's upside in our average ticket, and so that's what we're going to continue to hone as we think about '13 and beyond. How do we continue to get price leverage as we think about sizes and then also specialty drinks? Specialty drinks cost more than brewed. Bigger sizes, obviously, cost more than smaller sizes. So we see upside there.
The second piece on the consumer side is the 20-inch touchscreen that you can see here. It does a couple of things. One is it makes it clear that this is not your typical coffee kiosk, right? This is something that says you're going to get a great cup of coffee out of it because of the experience you're going to have. But it also is a great marketing vehicle for the business to be able to draw in and attract consumers. And then once they get there and use the kiosk, it's a really simple user interface and way to engage with the machine.
The last point here is its easy way to pay. As you can imagine, when you're charging $1, $1.50 or $1.50 and $2, respectively, for your cup of coffee, you need both cash and credit to be able to meet the demand of your consumers. The thing that we've actually added in this generation of the kiosk is a promo code. You might be familiar with promo code from the Redbox business, but this is a great way for us to think about how do we generate trial and enthusiasm so that people can try that first cup and say, "That is a great cup of coffee, and I had to do it at a very low cost." In the case of promo code, we have the ability to really flex that promotional asset, which we couldn't do with the original machine. So this is what we've been spending a lot of time really honing as we've taken that pause on the kiosk, and now we're ready to run into 2013.
So as you see here, this is our rollout plan for 2013. The red are the original 5 markets that you saw. The other 10, the gray, are the targeted market plan for 2013. These, of course, will ebb and flow as we continue to build out the markets with our retail partners. But what we're really excited about is that we're going to start running at these markets in earnest starting in Q2. And we're actually already putting, as I said, some of these next-generation kiosks on the ground this week and through March. But Q2 is in earnest when we'll start deploying the kiosks across the country.
So that's 2013. What about thinking about longer term? Some of the work that Scott talked about in the total addressable market, he talked about it in the food and beverage space. If we double-click on that and say, "What does it look like just for coffee?" Coffee is a $14.5 billion market. That's the away-from-home coffee market. We think that the automated retail sweet spot within that is about an $800 million business. So again, what can go through a self-service kiosk? And so if you just do simple math, which is that $800 million over that $12,000 in revenue per kiosk number we talked about, that's suggesting market or a white space of 65,000 to 70,000 kiosks. Now again, I'm not saying we're going to go put in 65,000 to 70,000 Rubis tomorrow, but what I am saying is that the white space, in terms of how many self-service kiosks should be out there, is 65,000 to 70,000. And our job is to go after that space and go after the profitable location and take our fair share of that market and drive as fast as we can against that opportunity.
So that's the good side on the Rubi business. Again, I think if I walk away from that, it's really about we are incredibly excited and enthusiastic about the business, and two, we're poised to capitalize on the growth, given the fundamental building blocks we've put in place to grow from this year. So incredibly excited, but it is important to think about this as a portfolio. As Scott talked about, some things will succeed, some things will fail, but we need to continue to drive the entire portfolio. And so we talked about the Rubi business. The other 3 I want to talk to you about today are Sample It!, which is our beauty sampling concept, Star Studio, which is our next-generation photo booth, and then Crisp Market, which Scott talked about, which is our prepared food concept. We're not going to spend much time talking about the Orango business as we're currently evaluating that business against the success metrics that Scott laid out, just as we do across all of our businesses. And then eco and Solo are our external investments. We're not going to spend time talking about those businesses given the interest of time.
So real quick on the Star Studio business. The reason that we really like this business, of course, we talked about the size of the market that we're playing in. That's about a -- just under a $4 billion space, which is, of course, the automation of photo, if you will. And so the first leg of that is really attacking the photo booth space. And that's what we're doing here with the booth that you can see on the left. It's a very engaging, interactive experience for consumers, generally teens and generally girls, but we have actually a good mix between. And really, what it is is actually trying to bring social media, connected content and green screen technology to bear in a great new kiosk solution.
And so for us, this is something that, as I said, teens really love because it's a great way to hang out with their friends. And then the property managers in this case, malls, is really having the majority of deployments today. They love us because it's a way to differentiate and have another all dwell-time product in their stores.
In terms of 2012 milestones, we actually increased this business at a multiple of 5x. We entered the year at about 40 kiosks in 2012, and we expanded into 3 new markets. We were in L.A. when we spoke last year, but we've also extended into the Texas area, and then into the Northeast in the Pennsylvania, Connecticut and New York area. And so those are all focused in the mall channel, and then we opportunistically test other channels as well.
In '13, as we think about growth for the business, we think the plan that we have of record is 5x growth in 2013. So you guys can do the math as well as I can, but 40 times a 5x growth gets us to roughly 200, is what we're hoping to end the year with in terms of delivering against our objectives. What we really hope to test is we've got a great consumer experience and a great revenue model just in that pure experiential photo booth experience that creates a great digital asset and also a sticker.
But how do you think about bringing that to the next level? And so 2 things that we're doing on revenue streams is, one, is getting licensed content and actually saying, "What if we could put really interesting movie content or music content in the booth that these consumers want to engage with? And can we lift revenue that way?"
And two, photo merchandise. Just think about the photo that you took with your daughter or your son in this kiosk, and then you can actually get product and merchandise, put it on the back of an iPhone case and have it customized on your phone. So another piece.
The second business that I wanted to give a quick update on is our Sample it! business. So this is our beauty sampling concept, so think of the beauty sampling that you might do at a department store. This is trying to bring that experience to the mass channel in an automated and a targeted way.
So again, the TAM, we think is about $800 million opportunity from the automated refill sweet spot. Consumers love it because you can try before you buy. Retailers love it because it's a way to lift category sales. So they try to sample before, they can get that exact full-size product in the retail store where the consumer is shopping. And so it's a great way to drive category lift.
In '12, we actually -- excuse me, we actually launched our first fully automated solution with this kiosk here on the left. This is the actual kiosk, not just a mockup. Really elegantly done design, branding, and then really engaged with the female consumer. And what we've seen is that consumers, again, voting with their wallets. Every sample today is $1 that the consumers are paying for. And the brands are actually giving us great products. And so the CPG companies, the brands are saying, "We get the symbiotic relationship, get samples in their hands to buy full-size products. How can we be a part of that equation?" And it's been very well received by the brand.
In terms of '13, we ended '12 with 2 kiosks. In terms of '13, we think we're going to get north of 20. Again, it's earlier in the process if you compare it to our coffee, the Rubi businesses. But along that same trajectory is what we're hoping to continue to build these businesses behind.
In addition to the new installations, we're going to new markets and new channels. So today, we're in the grocery channel. We're also going to test drugs, and mass is where we're going to spend the majority of our time.
And then I won't spend much time here on the Crisp Market business because I think Scott did a great job with it in terms of talking about why we love the opportunity. I think just to give you a little bit of a sense of what we're hoping to accomplish this year. This year, in terms of where we got it in 2012 milestones, we actually created this kiosk and this brand from scratch. We got it in the marketplace and has been very well-received by consumers. As Scott said, great usage and then also great repeats in the office channel that we're at today.
We plan to continue to build out density in the Chicago market, really focus on Chicago. If you guys can imagine, this is a distribution business. It's all about proving that you can make market economics work, and so that's what we're focused on here with Crisp Market. And so expect us to have 20-plus deployments in the ground by the end of the year for the Crisp Market business.
So I think, as I mentioned, it's important to keep in mind that this is a portfolio, and we feel like we've got some very interesting growth prospects, as we talked about, that we're excited about. With the Rubi business that we're going full bore ahead in terms of scaling that business starting in Q2, we've got additional growth behind it that we talked about with Crisp, Star Studio and the Sample it! products. We continue to always be evaluating these concepts against our success criteria, which, again, if I'm in your shoes, that's what I'd be asking for, is make sure we're making the right investments.
And then, of course, on the external investment side, we continue to be very excited about those businesses as well.
And so in total, as a growth engine, as we think about new ventures and strategic investments, we think it's a powerful equation when you bring that together with Coinstar's capabilities, and we're excited for '13.
Thank you. With that, I'm going to introduce Anne Saunders, the President of Redbox.
Good morning. How are you all? Good. Hey, thank you. Okay. That was actually the Coinstar people, but so really happy to be here. I joined Coinstar at the end of August in 2012, and what I want to do a little bit of, I'll tell you a little bit about my background, but I wanted to start with my Coinstar story.
So I have had a relatively long career, somewhat deep in marketing. I have worked with companies like Starbucks, at Bank of America, at AT&T, where I have been able to accelerate growth for all those businesses through new distribution, new products, and importantly, through consumer insight.
And when I was first approached about the opportunity, Coinstar used some of the folks in senior management, and that was a big draw for me. But I have to say, especially to the recruiter, I said, "You're really using the disc? Isn't the disc dead? Like I -- that doesn't sound like a really great business." So he wisely and happily said to me, "You should go learn some more before you decide not to talk to these folks," and I did. And what I came away with as I interviewed, and now in my first 6 months of the business, was a tremendous excitement about the possibility and the opportunity we have in the business. We all know the disc will go away some day, and like David, over a cup of coffee, we can probably talk about when that will be, but -- and have different points of view. But the thing that I do see in our business is a tremendous set of assets the company's grown over the last 10 years that we have only begun to leverage and take advantage of. So I see this is the kind of opportunity -- we'll talk about why I see that and how -- what our plans are, but I see a lot of opportunity for organic growth.
And then the other thing we'll talk about are some of the new ideas we have to really help change the line on our product life cycle curve. Because I think we've got a really healthy brand, that as I look at it, has world-class loyalty, has an enormous customer base. We have an opportunity to continue to expand that brand. So that's what we want to talk about today. And here kind of is my picture, my diagram of where we've been. So first 10 years of the business, obviously, right? We've figured out the idea, much like you're hearing David talk about with his new businesses, right? We figured out how to make the kiosk work, we figured out what consumers wanted, figured out where to put it and how to manage the inventory and the box and so on. After that -- someone was joking with me about my map looks like it has measles, but network expansion, we'll talk about the size of that network, but that's what we've been spending the last 5 years doing, is substantially driving and growing our network.
What our opportunity is for the next 10 years and then beyond is to take that network, take the customer relationship, our great relationships with studio partners and build deeper relationships with our customers. We'll talk about what our plans are to do it. And then, over time, we'll talk about our Tickets business. We'll talk -- the CEO of Redbox Instant by Verizon is here to talk about our new partnership with Verizon. We'll talk about where else we can expand the brand. And what I'd like to say to my team is 10 years from now, right, we just celebrated our 10th anniversary, people are going to look back at us and we'll be telling the history, the story of the company. And they'll say, "You know what, these guys came -- when you guys came, you guys had like a physical disc and you had a kiosk product. I didn't know that's where you guys started." So there is a ton of run room in this business.
Here are the assets. I'm going to walk through each one of them, about the people and the team we have, the partners, or my measles-like map, my networks. Marketing engine. This is -- and again, given my functional background, really, I am impressed with the set of assets the company has built and feel like it is on par with any world-class business. I think you may not think of us as a direct marketing engine, but we are, and we are including our capabilities there. We'll talk about the brand and its value, and then ultimately the customer base.
So we have a terrific team. We have about 2,000 people. A lot of those people are out, distributed across the country, and they go and physically put the discs in the box and take them out and take care of those machines. But one of the things I have been tremendously impressed with -- I've worked, again, at world-class companies. As I came to this business, the level of commitment and passion on the part of the people in this business is a tremendous advantage for us. As we continue to look for new innovation, as we put teams to look for new ideas, the commitment is really significant. I wanted to start with the people, and it's certainly not something that's easy to quantify, but in my personal experience, I really feel privileged to lead this team.
Content partners. So in January, I was at CES for the first time to meet all the studio heads, and I will let the person go unnamed. So one of the folks there said, "You know, 3 years ago, I wouldn't even tell anyone I was taking this meeting with you guys. But now, you guys are a respected part of the industry." Right? We've moved to a position where, in many of the instances with these studios, we are their #2 or 3 largest customer in the home videos area. We have signed deals since we were last here with studios that previously felt it wasn't to their advantage to do business with us, but now they do.
So by and large, our relationships with these studios are productive and positive. One of the things we are working on and a lot of the discussion we had is how to continue those relationships to areas where we can help accelerate other areas of interest for the businesses. So over the last year, we had Bane [ph] going out and do a study. We used data that many of the studios gave us to provide a look at what our impact was of rental on sell-through.
So from our perspective, right, we had always felt that rental probably helped sell-through, but studios had a different point of view. What we see now though, quantitatively, is that, in fact, for most movies, maybe there are some exceptions, and then easily large box office movies. But by and large, people want to try it before they buy it.
So we are working with the studios, and we just launched a pilot with Sony on our kind of our first initiatives with Hotel Transylvania, and we offered the customers -- our customers directly, while they were renting at our kiosk, at the website and then after they'd rented, we offered them an opportunity to have a discount on the sell-through of the product. So we're still reading that test, but we have lots of interested parties to help us to continue that process.
Another thing, another advantage that the studios see from us is an opportunity to highlight content for them that continues to provide a differentiated experience for customers. So 3-D, for example. Several weeks ago, we did our first test of 3-D home rental, and it ends up to be on the same disk with the Blu-ray. It's actually fairly easy to execute. But what we found was we got a slight lift in overall rental for the title; we did a test. But the really interesting thing was the people who rented Dredd in 3-D, I don't know how many people have seen that movie, but the people who rented Dredd in 3-D, 68% of them said the reason they rented it was because it was 3-D. So we continue to think that kind of experience, that really unique, intensive screen experience is something that we can help the studios bring to life, and ultimately, will help us grow the business.
Our retail partners. I mean, you've heard a lot about that today, right? That is a huge asset that the business has. We are in all the major retailers. We have very a distributed volume. So happily, right? We are not concentrated in any one specifically retailer. Just like the other businesses, we bring traffic to the retailer. The reason for the visit was Redbox and often as an add-on purchase. The retailers understand that and are pleased to see us there. I think big opportunities, we've done a little bit of but we have further we can go, is working with those retailers to try to drive traffic, but also accomplish some of the other objectives.
So the Thanksgiving on Black Friday, we did a really interesting promotion with Walgreens. If you bought a specific product on that day in Walgreens, that specific set of products, you could get a -- Walgreen's bought you a new movie, right? So free movie night.
So over a 15% redemption of those promotions that were done. So something that ended up for us to be a nice traffic driver, also for Walgreens, exceeded their expectations in terms of consumer interest.
So here's our footprint. We are -- we have the largest -- we have more points of presence as a retailer than Starbucks and McDonald's combined. If you think about the breadth of that footprint, where almost 70% of people live somewhere within 5 minutes of a Redbox, we're going to talk about size of market and our share, but we have a unique ability to really reach the customer in a way that very few other retailers do. And I want to really make sure that I'm doing a good job of communicating the power of the assets that we have here.
So you always try to think of some comparative that kind of captures the imagination and brings it to life, but in a single year, 25 billion impressions were created for Redbox, right? So 250 Super Bowls, right? So it's big.
So we started, as a company, right, sending e-mails to customers to talk to them about the movies that were coming up. And you've heard the number a few times. So we have 40 million e-mail addresses that we are able to, on an ongoing basis, communicate customers to. We're getting more sophisticated about what the impact of that is and the value of that, but what we're starting to do is understand the economic value to us in terms of annual revenue or lifetime value by customer if we have the marketable information.
As we move to our website, we have more than 10 million people visiting the website every month. It is more than an ability just to find out about what's at the box. You can also reverse and pay for a movie online so that it's waiting for you at the box. So when we talk about reserving online, we're actually talking about people transacting with us on the web and mobile-y. Because if they don't pick the movie up, we still pay. So as you can imagine, we're trying to drive more and more of our volume of customers to reserve online. It helps our inventory planning, but it also is another way for us to add value to our customers to make sure that they know the product is there when they get there.
Moving on to social, over the last 18 months, we have been focused, as many companies are, in building our Facebook fan base. And right now, we've just passed the 5 million fan mark, larger than Netflix's 3.8 million Facebook fans. And that's another way for us to add value to the customer with interesting content, with promotions, with the ability to create community.
And then finally, on the mobile side, and this is -- I'm showing a smartphone there, but it's also tablet-based. 1 in 18 million of our apps have been downloaded. So this is what's in the box right now, where is the nearest location that you might want to rent from. You can also transact online mobile-y with us. And I think one of the really interesting things that we've done, had real impact that I saw in this business, was we had been -- you could pull up the app and see what was in the box. Just recently, in the last month, we've added notifications. So we're now pushing to you. It tends to be Tuesdays, right, when we know about new releases. We'll push out to you what those new releases are.
On a typical day online, we're transacting at about 1,000 movie rentals an hour. After our first push, that jumped to 3,000 per hour. So the power of as we expand the number of people we're able to be in touch with, expand our capabilities to reach them, we saw a direct impact in our ability to transact with them.
I think, overall, I'm going to talk to you later about that this is an enormous area of opportunity for us to mine and leverage.
So loyalty. So I've worked at world-class brands, and when I got here, this shows the most recent last quarter NPS numbers for us versus some other really well-loved, well-respected brands. We have an overall 86% net promoter score at Redbox. And you see, right? I swear to you, those people you see there who are getting married, they met at a Redbox and then they wanted to go get married at a Redbox.
So the -- I compliment the business on a very strong delivery against the simple and core value proposition, and that's what gets them this loyalty score, right? We're convenient, we're easy and we're affordable.
Our opportunity, heading forward, is to continue to deepen that and make the way people think about us broader. But what we do today, people give us a lot of permission and a lot of love. So how does that kind of combine to net out to a customer base? So since I'm trying to wow you with my numbers here, like Scott, do I have 5? No, I only have 4 million. Okay.
So the 2 -- you guys are a tough audience. Jeez. Okay. So 2.5 billion rentals to date. Last year, it was almost 500 million rentals. If you kind of now -- and I don't know how aware of this you guys are, but we identified today our customers by credit card. We are moving rapidly, and by the end of '13, we will have a master ID. We'll be able to household or collapse different credit cards into individual customers, we're overlaying customer data, a lot more sophisticated about how we look at the customer. But if we use the data we do have, those 480 million visits translate to about 42 million customers who transacted with us in '12. And if I look at that and break that down a little bit in terms of frequency, about 1/3 of those customers are coming every quarter or multiple times a quarter. And that's that customer base upcoming 6x a year. And some of my -- so it's a large group of people, right? 15 million is -- I shouldn't do math in front of all you guys on the stage, but so, it's a large group of people who are coming 6x a year on average. So less of the customers, if you look at our whole customer base, is coming, on average, 3x a year. So if I look at that and I think, I can get one more turn, right? One more movie rental, it's $0.5 billion on the top line.
So there is a real opportunity to take people who love our brand, we are highly convenient, and help them transact with us just a little bit more and have a large impact on our business. And that's really, right, where we're going to take the business. You see the timeline on the top where we've been, where we're headed. And I think as we built the business, and so we expanded the network, what we measured ourselves on and what we tended to talk to you guys about was transactional, right? How many rents, how many new kiosks, and really looking on a rent per kiosk per day. And we tended to look at our business somewhat functionally and somewhat transactionally. We won't lose that, we will still focus very much on unit level productivity and return on capital and individual unit. Part of the pivot, though, I'm trying to make for our team is to add the right-hand side of that equation. Again, we have a really well-loved brand with a pretty simple value proposition. How do we continue to bring new ideas, new value, new products to the customer that deepens their emotional connection with us, really lets them have a relationship, although all they're doing is getting married in front of our box, you have a relationship with us.
But ultimately, also starting to look at ARPU, an average revenue per user, as a metric we'll measure ourselves on. So we'll continue to understand that customer base better, we'll segment it, we'll baseline where our revenues per customer are, and we'll focus actionably on how we get those people who are the frequent users, who are coming multiple times a quarter, to come 10x a quarter. How do we get those people who are coming 3x or 4x a year to start coming monthly? And as we look at the business, we can action it significantly better, right, if we're doing it based on customer behavior rather than simply transactions at the kiosk. It all slows up and will translate to that, but increasingly, we want to think about our business as a recurring revenue model with the good-paying customers.
So opportunities that I see, so our assets, what are we going to do? So we've started. We're well on the way. But what I'm going to talk to you about are the strategies, hopefully, that we will start to see the impacts of later this year, and then as we go further. So lots of discussion today on the total addressable market size of that market. You may have heard us in the past talk about the DVD rental market as a $5 billion to $6 billion market. What we're looking at now, as we add Redbox into Verizon, as we continue to evolve our thinking, right, is the market that includes streaming, just closer to $8 billion. When we look at -- to size it specifically for the Redbox core business and those things that are easily addressable in a kiosk that are new release-oriented, that are movie-oriented, we think that's at about a $4 billion market today, and we have roughly half of that, right? Depending on the month, we have mid-40s of the share.
So this still, right, is opportunity to just grow share. I think that's what you're going to see here is we also think there's great opportunity, our frequency among our existing customers, but still, the market's large and we still have a big opportunity.
Canada. So Canada is the third largest rental market in the world. In the last 12 months, they've had 2 big major brick-and-mortar players in the DVD rental ends of the market. So it's a vacuum there in terms of demand. We have started to deploy. We've got about 300 kiosks there, fairly distributed geographically. We haven't yet started to install in the kind of high-population areas, which is on our roadmap and we're beginning as early as this month. And we have signed relationships with major retailers with more on the way.
So by the end of the year, I think we'll be largely done with our installation into Canada. It'll be somewhere between 2,000 and 2,500 kiosks. We anticipate them to be slightly below productivity levels of the U.S., but not significantly.
Okay, more, better entertainment. A couple other things that we continue to expand the mix -- our product mix beyond DVDs to include Blu-ray, talked a little bit about 3-D, right? That's probably a very small part of the business. But -- and then game. What we're seeing is 2 new categories for us in Blu-rays and games that's accretive to revenue and to margin dollar that provides a differentiated experience for customers, but on the daily side helps reach a customer who's really probably underserved.
So we see the opportunity here to continue to grow the percent of our business that's in both of these categories. We test on Blu-ray right now. We have a couple of markets where we kind of test unconstrained purchasing of Blu-rays so that we're hitting the optimal buying level. So we're managing product cost with demand and are learning about that a great deal. And depending on the genre, right, we're seeing very significant Blu-ray penetration.
We also think on the games side that this is another opportunity, like the try-it-before-you-buy it, a trial mechanism. The casual gamer who doesn't want to spend $60 or $70 for a game they don't know that their family's going to enjoy it, were a really unique opportunities for both retailers and game publishers for trial.
Marketing. So I talked about the set of customers, I've talked about our marketing engine, our assets. Today, what we've done with our marketing is very uniform, right? So James here in the front is a huge romantic comedy fan, right? And he always wants to see the latest Reese Witherspoon movie, right, for sure, right?
And Rosemary, you wouldn't -- maybe you guys don't know, but she loves horror films. So, yes. But when James or Rosemary get an e-mail from us every Tuesday and every Friday, they get the exact same assortment of products merchandised to them, and it wasn't a romantic comedy or a slasher movie. It was the latest Seth MacFarlane movie, right? Well, neither of them likes Seth, right, particularly after what he said about us at the Oscars. But so, you guys are all going to have to go look that up and see what the tweet really was.
So what we are able to do, we're building an infrastructure and the capability to do, is to target specifically, right, and merchandise in a customized way to each individual consumer based on their own personal preferences and the profile they build based on their past history. If you think about it, right, we have 10 years of data tied to individual credit cards that allow us to know what you rented and what you really like.
So you'll see that in our communications. You're also going to see it in our interaction, our UI with you at the kiosk or on your mobile device. So right now, as James was returning Hope Springs, and he wants another movie but Hope Springs is on the front of the UI, it still comes up even though he's rented it. With relatively simple changes to our infrastructure and our UI, we will be able to provide a much more relevant, customized experience for our customers that we believe will drive the frequency increases that we want to see. And I think in the upper right-hand corner is just a prototypical design. When I was at Starbucks, I launched and then ramped for 6 years the Starbucks Card business. And I look at -- and Mike talked a lot and the company has depths of understanding of gift cards, and Mike is doing a lot of work in alternative payment. If I think about gift card, there are very few businesses where the high perceived value, high-frequency, but low ticket dynamic is in existence, right? You don't go reload your Home Depot gift card. You do reload your Starbucks Card. I think you have a lot of analogies with that business with the existing business that we have at Redbox. Currently, there is no easy way to give Redbox as a gift.
So that's an area that, I think, has, again, a lot of potential for us. Many of the things I've been talking about are very time-tested methods that other companies are using successfully to grow -- to drive organic growth in their businesses, and we have those same kinds of opportunities. This is a little bit of an example of what you'll see from us, even beginning later in '13, about a personalized version that's at the kiosk, mobile and then on the web. And it would be both between notifications that you received right now on Tuesday, I'd push the same things to all of you. I don't need to tell you that it's in the box if you've already rented it, or, if like James, you just don't like horror movies. We can have recommendation engines, but again, we know pretty well what we rent, right? Like Jennifer Aniston, Kevin James and a dog rents really, really well. So we can use the data we have to help get you a better experience. And if you think about it, right, we've got about 200 titles in that box. No one is going to go through a UI and browse to find what's in the box. If I can get 1 or 2 more turns on some of that product by recommending, it's going to significantly improve the top line of the business. And then wish list, this is also getting the customer involved in driving that recommendation engine. When you see something online that you're interested in, how do you just click a button to add it to your Redbox wish list to be notified when it goes into the box?
Those are a lot of the things we're going to be doing on the top line side, right, to drive revenue. We're also really focused on margin management and to continue to drive efficiencies into the business. So we talked about, right, 43,000 kiosks, and we have very broad coverage. As we brought in the best of the NCR kiosks and we assimilated that acquisition in the last year. As you would imagine, right, some of the trade areas changed. In some places, we are oversaturated with kiosks. And what we're doing now in order to be smarter about how we are going to continue to grow and refine and deploy the network is we built P&Ls at the banner level and at the individual kiosk level so that we can better understand what the impact of the traffic is, how, if a box -- about 46% of people rent one place and return another. That also has a dynamic on how we want to re-rotate inventory throughout the network and how we allocate inventory to begin with. So we're taking a deep dive to make sure that we have optimized the network. We're going to be very proactive about working with our retail partners to take out assets that are underperforming and maybe now are in a saturated trade area, redeploy those assets into maybe places where we could have a dual kiosk or maybe they have a grand opening. So you're going to see us not grow in terms of installs at the same level we did last year, but remember, right, that was a year that we incorporated the best of the NCR locations. But what you're going to see is a very thoughtful way to optimize the network. The look that we have too, again, at this detailed P&L level, is also going to employ opportunities to where it might make sense to go out and stimulate demand in different ways. We -- well, I think one of the things that's a tremendous advantage of our business that I really didn't talk about before is we've built that customer base, we've built those assets by virtue of the footprint and the value proposition, not by virtue of a large advertising budget. So you're not going to see that, right? You won't see us spend 6 points of the P&L on advertising. But in places where we do have oversaturate-ment, it may make some sense to go out and see if we can stimulate demand a little bit.
So our ability to just get deeper into this and look at it in a more sophisticated way, I think, is going to help us continue both to grow the business and manage margins.
And the next is an inside view of the kiosk. And this is a product that I think is super cool. It's called the VMZ, or the vertical merchandising zone. So our Boxes right now, if you look on the right, what these guys are doing, when we are managing inventory in a box, if we know something needs to come out of the box today, we drop it into, at the point in time we decide to send it, before the field rep comes and takes it out, right? You drop it into that white box. Once it's dropped, it's unavailable for rental. Part of what the team did was rethink how to look at the box. We're taking that thing out, that's just called the QLM [ph], and putting in another -- what do you call those things? Carousels, thank you. You put it in another carousels, and what it allows us to do is get incremental volume, but it also is merchandising rather than dropping the stuff, it merchandises and basically puts all of the discs that are going to come out in a specific location, but leaves them available for rental. So it's going to be easy when the service tech comes to drop the disks that need to come out. But it's also going to free up the ability to continue to have inventory available for merchandising and add capacity at those locations that need it. It's a relatively inexpensive retrofit, and going forward, it's more expensive to -- it's more cost efficient, actually, to manufacture.
So the thing I love about those, right, is we're having opportunity to drive more capacity, more top line. We're more efficient in utilizing our field sales representatives, and we're also looking at things that will help us add turns to the product.
So that is the opportunities that I see and our plan of attack to grow our core business organically. I want to talk to you about some of the things that, if I look at my earlier side, this is about how we continue to expand the brand. And for a lot of you guys, I'm hoping I'm convincing you that if you thought that what we were on the right-hand side of that life cycle curve, right, that we are actually further over towards the left. But there's also a chance, I think, for us to really reset the direction of that curve. And let me talk about what I think the really big opportunities are that are on the horizon right now. And we are active students of what's going on with consumers. We see, for example, obviously, right, our customers who are using tablets and are viewing content on tablets. We also seeing them interact with us on the tablet. I mean I talk a lot about the growth of our online transactions. We are seeing a dramatic increase in the number of customers using their iPads or their tablets, their smart phones to actually transact with us and reserve movies.
We also think that that's never going to completely take the place of that individual personal experience, never going to completely take the place of the 10-foot experience that you have. We see our consumer data is showing that customers are not watching less movies. What they're actually doing spending their hours watching other types of content. So episodic TV is really good right now, right, short form content. So we're looking carefully at that, and we're going to determine whether or not there are opportunities for us to slots in the box, to offer content in areas that consumers are interested in. It doesn't mean we're going to go spend $100 million to do House of Cards, right? We are not going to become a production company. But we do know, with our existing data, what types of content, specials, different kinds of genres, different kinds of actors might be really something that would have traction with our customers. It's an area we're exploring; you'll probably hear more from us.
Tickets. You guys will get to see outside, we have tickets launched in Philadelphia and in L.A., and you'll see the inventories available in L.A. out on the box at lunch. But let's talk a minute about why this is such an interesting idea for us. So the live events market is 3x as large as the home entertainment DVD market. It is a highly fragmented market, high levels of customer dissatisfaction with existing methods and cost of pursuing tickets.
On the inventory side, it's not -- the industry is not happy either. They have, on average, right, it depends on the event, but they've got about 40% of seats unsold. And a lot of their traditional promotional vehicles is going away, right? There's no more local newspapers to advertise events, local radio doesn't work. So they've got excess capacity, no way to market it, but the way they are currently selling is something that consumers are unhappy with in terms of fees and costs. We think there's an opportunity for us to come in and be disruptive in that respect, to really leverage our assets. We can take advantage of people's thinking of us as a destination for what to do over the weekend. We have the foot traffic and impulsive retail purchase. We have the ability to be hyper-local about what we offer at an individual kiosk level. So we can be very customized, even to a local neighborhood. And we go back to the $14 billion market. Don't just think of sporting events or concerts, right? The largest part of that market is actually museums and craft shows. We could get down into high school and college sports. It's really an unlimited ability, right, to offer inventory to customers. But again, it's easy for us to incorporate into the existing framework of the business. For us, it's another opportunity to extend the brand into entertainment, not just into movies. We launched in fourth quarter of last year in Philadelphia, and then the first quarter this year in L.A., and here's what we've learned so far, right? Here's what we' validated. We validated that we can do this, right? That we can put it on the UI, that it doesn't slow the transaction down, that customers are comfortable with it, that that all works. We've learned, and you see some of the fun quotes there, the customers really like it. The value proposition for them is you're buying a ticket at face value plus a fee of $1.
Our compensation is the $1 plus commission we're paid from the industry from the inventory holder. We don't hold the inventory; we take it on consignment. So if you think about that from our perspective, extremely low cost to play, right? We've done a little bit of update on the kiosk and the UI, but there is no cost of goods there. So the customers are comfortable with it. The industry is really interested, right? This is a brand new distribution vehicle for them. Many of them get the power of the retail networks that we have. And one of our early successes in Philadelphia was at the Carrie Underwood concert. We got some tickets, relatively, we ended of the market after the tickets have been on sale. But within 4 weeks, we ended up selling 10% of the house. So in the ticket industry, that is the extremely significant impact in a relatively short period of time. What we don't know yet or what we are still validating, because it's still really early, we're validating what the inventory tipping point is, how much success they have to show before everyone jumps in. If you can imagine, there are a lot of people in the industry who are not really excited about a different payment model, and they're going to be happy with it as long as we're incremental. So where is that tipping point? We're working on that. I don't think we have the positioning quite right yet. We need to figure out both how to explain to customers we have tickets, but then also what the value proposition is, and there's -- we'll get that right, but still working on it. But from our perspective, we think it is well worth spending time to work on it. One of the other steps we found in Philadelphia, that almost 40% of the people who bought tickets from us had never bought anything from Redbox before.
So we know it's a way that extends our brand. We know customers like it. We believe we can create unique value for the industry, and we're going to take our time. We're going to be patient and we're going to get it right, and you're going to see us get a little bit more scale out of the markets we're in before we decide to go any further than that.
So with that, I am -- because we are an entertainment business, I want to introduce our guest speaker, Shawn Strickland, who's the CEO of Redbox Instant by Verizon, by showing you a little video that we've created to promote Redbox. And if you like it and I get any laughs, it would be mine. If it's not, it's going to be Shawn's video. So we'll go ahead and turn that on.
That might be the best introduction I'll ever get. Thank you very much, Anne, for that. I'd also like to thank Paul, Scott and Galen for inviting me to take a dip in the shark tank here today.
So I'm John Strickland, I'm the CEO of Redbox Instant by Verizon. And I come from Verizon. I've had a number of years at Verizon, including helping to build the flat TV business and a few other things. And I was asked to join the -- you got the clicker there, I'll take that, actually. I was asked to join the JV here after the relationship was struck in. I've been spending the last year, I guess, basically building the infrastructure and tightening the value proposition and getting us into a position to be successful with the JV.
In terms of where we are, so we signed the deal back in February of last year. We spent the next 10 months building and integrating 22 systems, and we're able to launch into a private beta.
In December, over the last 2 months then since then, we've been doing a few things. We've been tightening the value proposition. We're getting a lot of feedback from consumers I'll talk a little bit about. We've been testing the systems. We wanted to because we were building this infrastructure from scratch, we wanted to make sure that it could scale the way we expected it to. And we're also getting feedback about the priorities from consumers. And so it's been very successful. We're on the verge here of coming out of our private beta and moving into a, what we call kind of general availability here very soon.
Now if I put the JV in a greater context of where Anne started here, I think it's important to understand that we are very much an extension of that strategy to move from a transactional relationship to a -- a transactional business to a relationship business. And the JV is built on the insight that we validated a few times now, that about 20% to 30% of Redbox renters also subscribe to a streaming service. Somewhere between 30% and 50% transact, so rent and buy digitally. So we know customers who are piecing together these elements on their own to build that, the rest of the pie that Anne showed us before. So there's an opportunity for us to bring those pieces together.
In terms of what we've learned so far, the Redbox brand and those relationships is incredibly powerful. So we haven't done any marketing yet. We've -- the press release, we have some social presence, and we have hundreds of thousands of people interested, expressing interest in what we are doing here.
We found that the DVD is so critical to this customer base. So we started actually focusing a little bit more on the streaming. And what we've heard back from consumers is that it was a DVD that was the core of that relationship. We're seeing great traction with DVDs. As an example, we're seeing over half of the usage of DVDs within the service in pre-reserved, which is significantly better than the previous experience. And we're seeing the consumers and look to the streaming as an augmentation of that core value proposition.
Our offering you see up here, the 4 DVD credits a month plus the streaming, we've got about 4,600 titles of streaming content. It is movie focused. That's the core of the Redbox brand and value experience -- value proposition. It also has rentals and purchase content within the same user experience. So if the consumer is interested in getting something right now, they could rent or buy digitally. So it's a vehicle for transitioning that customer into that ongoing service subscription.
What else are we learning? We're learning about priorities of the 10-foot device. We view the 10-foot device as important. We've launched, so far, Samsung and Xbox. We've announced also LG and Google TV, and we're working on many more. So that's a big priority for us in development going forward.
Content. We have a lot of great content in the service in addition to the DVDs. And what we're getting a lot of feedback on is which titles to bring to the front of that experience. 4,600 titles, you got to make sure they're the best, first and foremost.
The -- in terms of where we're going now, as I said, we're on the verge now of coming in out of our private beta. Our focus going forward would be on a few things. On the platform side, we continue to incrementally improve the quality and stability and the reliability of the platform. On the device side, our focus is on 10-foot devices. I referenced what we've launched already and we're working to launch many more.
On the content side, we look for feedback from the consumers. So our expectation coming into this marketplace is that we were not trying to rebuild what Netflix and Amazon have already gone down the path with, with all content available to everybody. We believe that the marketplace is going to evolve fairly similar to the cable networks marketplace, where you have branded audience space value proposition to the marketplace, and consumers are assembling according to their interest. We see that in the marketplace today. There was some recent research from Old and Ugly [ph] that suggested that the average streaming household in the U.S. subscribed to just over 2 services, and we believe that that is a behavior that we'll see going forward, behavior that we'd seeing internationally with some other different TV models.
So our value proposition and the content of the value proposition will learn, based on the feedback from the consumer, about which content will be of more or less interest. And as we learn about that interest, we'll tighten up the value proposition on content, and add more targeted content and video offerings to strengthen that value proposition.
And then the other big piece of this goes back to the core fundamental of the JV to begin with, which is the power of the partnership. So we've got Redbox and Anne kind of went through, really, all the foundation of all the great things from a customer relationship, from a marketing end perspective, that we can bring into the JV. On the Verizon side, we are -- we will be activating the Verizon telecom relationship and footprint, as well as the Verizon wireless relationship and footprint. And as we tap into those relationships, those vehicles, the retail environment, we believe that will be a critical growth engine for us here after we come out of our beta period going through the rest of this year.
So we're very, very excited, very pleased with the progress we've made so far, very excited about the opportunity ahead of us. We think, as we look at the marketplace, we think that today, the addressable market are -- will be movie streaming. Those who love movies and are interested in streaming is about 35 million household. We expect that to grow as the awareness and availability of streaming devices and streaming value propositions grows. And when we look at the tools that we have in hand from the partners, we think that we can capture a significant piece of that marketplace. So I think at this point, we might take some questions.
Paul D. Davis
[indiscernible] he is willing to join us, however, he does have to catch a plane. And so what I'd like to do, we wanted to give you a little bit of a chance to ask some questions to Shawn around Redbox Instant or to Anne. Keep the questions to Redbox Instant. We'll have a Q&A session at the end where we can talk about the rest of the businesses. We have a few minutes to be able to do that before Shawn has to get out and catch his plane.
Can you describe if the economics are fixed going forward? And at what point will there be milestones where we might tweak the mix for movies or -- and how the revenue share goes going forward? What's the arrangement long-term?
In terms of the partnership? So I would say that -- as we get the feedback on what the customer base is interested in and what might have more or less a feel, today, we have the 4 DVDs, we also have the 4 Blu-rays as an option. But to the extent that we see an opportunity, we'll work with partners on a relationship that makes sense.
Paul D. Davis
[indiscernible] looking at this driver for [indiscernible]
From a Verizon perspective, we see this is a down line growth opportunity. Obviously, there is pull-through from a network services perspective, but from the Verizon perspective, what we saw is we made this new investment in infrastructure for FiOS, both at the customer's end, but also back in the network, and it was effectively landlocked by the footprint. We also saw the macro growth trends indicating that there'll be more and more of the customer time and attention of viewing moving onto the digital platform. So we definitely see it as a growth opportunity.
Kind of an extension of that, what's the marketing plan from Verizon's perspective? Are you guys going to try to integrate it into offerings and do 2, 3 months or that kind of thing?
We're working through some of that. Our first priority will be on activating the existing channels and integrating the offering of those existing channels. And then as we work through that first wave or first couple of waves of acquisition, I would see us getting more and more integrated. Our first priority will be on activating channels and retail stores in the Verizon Wireless side and perhaps looking at new campaign opportunities.
I have 2 questions. Can you talk about some of the problems you've seen on scaling the Verizon CBN? And then the content that you have, obviously, the content guys want to lock that in, and there are several lawsuits about you can do it at home, but you can't do it on mobile. Where does Verizon content agreement stand right now?
Sure, I'll start with the second. So the content rights we have are not tied to -- you don't have to be a Verizon customer, either Wireless or wireline or FiOS. They are national multi-screen rights for the content. So there's, as opposed to a TV everywhere type of model, that does have all the subscription. On the CBN side, one of the things that we're working through right now is in parallel to the development of our platform and offering, the Digital Media Services group within Verizon, is also building their platform and offering. And so we've learned a lot from the beta period about the performance of that platform. We're working to bring in its second and third CBN, which is the industry practice. We launched the single CBN. So we'll be improving that over the next few months here.
Paul D. Davis
We have time for one more.
Paul D. Davis
So the webcast question is, why did Verizon go with the JV with Redbox versus in Coinstar rather than just having a vendor relationship?
Yes, maybe I'll throw in my perspective and Scott, you might have perspective there as well. I would say from the Verizon perspective, we saw a great opportunity in the marketplace. It was an opportunity that we were considering how to participate in as we kind of fortuitously came in and talked with the Coinstar folks. And one of the things that we thought was really critical to success in this space was the strong brand that could stand on its own. Ultimately, they exist [indiscernible] moves to an app store. In an app store, if nobody recognizes the brand, you really don't get any traction from a marketing perspective. So from a Verizon perspective, that was immensely feeling just the strength of that brand from those assets that Anne showed you before, made it a no-brainer for us.
Paul D. Davis
And we've talked about in the past how important we felt it was to partner up with a partner that had good access to content, had very -- from a backbone perspective, and also had the same view around the market space that we did in leveraging the Redbox brand. But also, our ability to leverage this customer base, have a large customer base, and deliver a great product offering with the view around content and cost of content, and how to deliver that content in a way that's much more economical than maybe some of the other models out there. And so it's one of the reasons why we partnered with Verizon, and we're very happy with that. With that, we've got to get Shawn on to a plane. Really appreciate you coming up. We're going to take a short break, and then we'll have Galen come up and talk. Thanks.
We'd like to get started with the last couple of presentations. So I'd like to introduce Galen Smith, he's the SVP of Finance at Redbox who is our incoming CFO. Galen.
Thanks, Rosemary. I'm excited to be with you all today and really try to pull together what you've heard from the great presentation that we've had so far. And we want to do it in talking about 3 different things. So we want to talk about where we've been, where we're going in the short-term, and then also provide some near-term targets, 3-year targets, to show you where we're going in the next couple of years.
So as we think about the business -- I just wanted to set up for you how we think about driving this business, right? So we think about -- our job is to drive shareholder value. How do we, every day, get out and think about how we're going to enhance the value that we drive to our shareholders? And we think about it in a couple of different ways. So right -- so we've talked about, throughout the day, that we're very focused, not just on driving the top line, but doing it in a very profitable way. We're not interested in just creating more revenue. We actually want to drive revenue -- sorry, we want to drive profit to the bottom line. We want to do it in a way that enhances the return that we have on our assets, right. So very focused on ROIC, and we'll talk a little bit about that more specifically.
What's amazing to think about this business is how it's changed from a free cash flow perspective. So Scott mentioned this before. A number of years ago, we actually had negative free cash flow, and it's gone from that point to over $255 million last year. And we'll talk about where we're going in the future as well. And then we're also thinking about, "What does our capital structure look like on a long-term basis? How do we have the right flexibility to pursue opportunities as they're there, whether it be something internally or something externally in terms of M&A?"
The thing about the business, Paul hit a couple of these, we've had some -- a great successful year in 2012. We had 19% revenue growth, 25% growth in EBITDA and 32% growth in EPS. And there are a couple of things that really drove that. One, we continue to see consumer demand grow, right? So we continue to see more people coming to the kiosks. We reported in our fourth quarter call that we had $39 million active credit cards within Redbox in Q4. It's our highest number ever, it's about 33 million active customers.
Secondly, we continue to focus on how do we drive gross margins and more importantly, gross margin dollars. So how do we manage the inventory in the best way and really work with our studio partners to have the right content in the right box. Great new locations. And one of the things that we did, we actually -- and this will come through as we talk about CapEx, we actually grew our base by about 22% last year. So big growth in the Redbox business. Some really great locations between Safeway and publics part of it. They actually acquired from NCR. But there's great locations, but there's also an opportunity, as Anne talked about this, how do we optimize that portfolio and really drive the business? And then operational excellence, this is something that we've been focused on the last couple of years where we've built out this network. There's obviously lots of efficiencies to get as you work to your supply chain. So we're very focused on that, not only within the Redbox business but also in our Coin business.
This is a snapshot of where we've gone over the last year, 36% compounded annual growth rate and revenue, 45% in terms of earnings growth, and our free cash flow, and again I want to spend a little time here, because I think it's really, really important. The last couple years we've benefited from not being a Federal cash taxpayer. So we had a number of NOLs that help support the business. The big change that we've talked about '13 guidance is that we have exhausted those NOLs primarily and now we're going to pay $90 million to $105 million in cash tax. We can really see again with that focus on automated retail with the ramping of the Redbox business, this business generates a lot of free cash flow.
We've also spent a lot of time thinking about how do we have the right assets, how do the right goes and how we drive profitability? So we get that right return on the capital as deployed, and we've gone from 8% there, back at the end of 2009, up to 18.4% last year. Now we're going to continue to make investments, as you know, in our Redbox and Coin business as well as the new ventures but we want to generate a return at 20% long-term.
So where are we investing our funds in '13? So really it's around, in Redbox and in Coin, we've got some attractive locations, but we are bringing down the number of installs to 500 to 1,000 within Redbox. Part of that is we installed again 8,000 kiosks net last year, 22% of our base. And so we really accelerated kiosk deployments that we might have done in 2013 into 2012 with a Safeway and published rollout. In addition, we're continuing to look at ways to, again, get the machines installed in the right places. So how do you pair the portfolio to generate that right level of profitability? And as we think about Coin, we think there's new opportunities, not only with some of the stuff that Mike talked about from the gift card exchange, but also in terms of some additional partners to move forward with.
We just talked about Redbox Infinite. It's a key focus for us this year. We'll talk a little bit about, in a few pages, about where we're spending our -- some of our cash this year. We have $14 million that we're funding the JV in Q1. We funded about $25 million in total last year, and we don't expect for our total funding of share to be more than that $25 million again this year, right? So some use of cash but not a big use of share.
We continue to expand in Canada, especially within our Redbox business. So we've got 1,500 to 2,000 kiosks we plan to install this year in that business, and we're excited about being a major player in entertainment space there. And then new ventures. David walked through a bunch of our plans for the year. The key focus, and again one that will be a very regimented structured approach to make sure that we're getting the right return long-term.
There's been a lot of questions since earnings, and we'll spend a little bit more time talking about this in terms of infrastructure and corporate CapEx. And so we'll talk a little bit more in detail about that, but it's really a couple of different areas. One, we've got software that we're building out within the business for a lot of the stuff that Anne talked about. Whether it be UI or ways to connect with consumers, there's investments that happens there, a big piece that we started a year ago is continuing this year is ERP.
So how do you have one system that you worked on? One of the things, and, again that's helped us get smarter in the Redbox businesses is having P&Ls in the market or kiosks, and before having a common ERP system, we didn't have that ability. And so it's been a great opportunity for us to figure out how do we get smarter about our business? How do we drive it for long-term? And then as we've shown in the last number of months as well as we talked about our earnings call for Q1, optionally [ph] repurchased share.
This is just a recap of the guidance we provided back in our earnings call and what you'll see is the actual ranges and then the percentage down the bottom, it's not meant to be anymore than just the midpoint. And what you can see there again is about 10% to 16% revenue growth over 2012. Even it's still growing, but not as fast. Part of that again is some of the investments that we're making this year, but we continue to think that EBITDA will grow going forward. And then -- a little bit faster, and then quarterly, the EPS is going a little bit faster than that, partially because of the benefit of that we're getting from our share repurchase we did at the end of last year.
Spent a little the time talking about CapEx and how we're seeing about the business. And we try to break it down as we've shared with you. So if you look at Redbox, right. Last year, in Redbox, we spent about $138 million on CapEx. And so what we've done is we, again, brought some of the CapEx spend from '13 into '12, and we reduced our CapEx planned spend to $73 million to $80 million. That includes 500 to 1,000 kiosks in the U.S., and 1,500 to 2,000 kiosks in Canada.
One of the things that we haven't shared up to this point is how we're thinking about our IRRs. I think it's really important to say that even though our installed base is over 43,000 kiosks today, we expect the U.S. kiosk to generate an IRR of 60% to 80%. The question may be, "Why not do more?" It really is because we think once you get to a certain level of build of network, there's an opportunity to simply drive more into the existing footprint and save on that CapEx. Canada, IRR, 20% to 30%. So a bit smaller, right? We're seeing it perform at a lower level than what we have in the U.S. It's a higher price point, but it's really just how the market is built out in Canada gives a little bit different market opportunity. Canadian's CapEx out there, about $7 million to $9 million. Over the long term, it probably goes up a little bit, but mostly they're very new machines and so we don't have a lot of maintenance needs.
On the Coin business, we've got investment in kiosks and software. Maintenance CapEx of $14 million to $16 million, and again, they're a little bit older machines than the Redbox business and so need a little bit more maintenance CapEx. But even with the installs that we plan to do in Coin this year, they're right in that same IRR range as Redbox.
New ventures in terms of our plans this year with 1,000 to 2,300 kiosks, primarily within the Rubi business, you can see our CapEx spend there. And then on corporate, it's really broken down into 3 buckets. That first bucket, the LOB corporate growth, one of the things that has been a focus within the last couple of months is all of our new ventures are building out, and they're building out independently. We've got a certain operating system that works on the Coin business and a different one that works in the Redbox business. But what if you could spend some money and build out a common platform, that as you drive new concepts or you want to take functionality from 1 business and port it over to the other business, that you're able to do that. And so part of one of the things that we're working on this year is building a common platform, that we'll be able to use based on business needs for each of those. So that sits in that first category, in terms of that LOB corporate growth and some other initiatives to help support what we're doing on the Coin and Redbox side.
The infrastructure piece, that $30 million to $34 million, the great thing about that again is this is the second year of our ERP installations. So that's a big, big component of that. And so that's something that Infrastructure CapEx will definitely come down as we go forward. But it's really important for us and, again, because it gives us better visibility into the business and what's happening today.
And then maintenance CapEx, it's, again, a bunch of different things just in terms of IT and what it takes for us to run the overall corporations. But hopefully, again, that gives you a view in terms of what those components are in that 65 to 75 range for that. This is -- we talked a little bit about this in terms of our free cash flow, right, so 180 to 200, it's a bit lower than what we had in 2012. Again, the key here is that we're paying $90 million to $105 million of cash taxes where we didn't have to pay that previously. So again, underlying that, right, is some continued profitability growth to drive free cash flow and help offset that $90 million to $105 million of taxes.
We do try to take a very disciplined approach to how we use cash, right? So again, when we see there's an opportunity for us to have the right size network build out then optimize that, instead of employing additional kiosks, we really focus on what's the best use of that cash from an ROIC perspective, where can we get the best return.
We also have, in the last 7 months, repurchased about 12% of the company. Again, we believe in the long term process of the company. We see value there and have been investing accordingly. And then we want to maintain M&A flexibility for things like we did last year, where there was an opportunity to buy from NCR, there are certain assets of their entertainment business and bring it over, replace it with our kiosk and drive a very profitable play.
And just an example on that. In terms of the NCR kiosks, we're depreciating on an accelerated basis this year, and so we talked a bit about on the call the loss we'll have. The profit that we'll generate from those replacements from last year will offset that, making it accretive just a few months after we did it. So it was one of those things where it was a great use of capital in helping us generate a great return.
We got a very strong balance sheet, low leverage, it's 0.8x on a debt-to-EBITDA basis, 0.4 as we think about it on a net debt basis. As we think about it, right, we want to have, again, the right balance structure. We want to be able to reinvest in the business, we want to have that flexibility for M&A, we want to be able to return capital as we see opportunity there. It's also very important, though, that we maintain a very strong credit rating. We want to have a strong BB+ -- or BB+ rating, and we don't expect our leverage ratio to exceed 2.5x, and we'll look at the market opportunistically as we go forward here.
As we look back, I thought this might be a helpful graph to show, again, how we view as capital. So from 2009 to 2012, we generated $603 million of free cash flow. $144 million of that went to debt retirement. And then that left about $459 million of free cash flow available for some type of return. We took that and we spent about $250 million on share buyback over that same period. In addition, we spent about $214 million on M&. A, that's really 2 main things. One is the completion of the purchase of Redbox, and the second piece of the NCR assets we acquired last year, and then the strategic investments would include things like Redbox Instant, as well as eco and SoloHealth.
So obviously, that totals out more than the $459 million, but again, trying to take a very disciplined approach, a very thoughtful approach to the cash that the business generates. To drill down a little bit further in 2012, we generated just over $255 million of free cash flow. $48 million of it went to debt retirement last year, which meant that there were about $208 million left. We spent about $140 million on that on share repurchase, $40 million went to the various investments that we made, including Redbox Instant, and we did $100 million again on the NCR.
So again, trying to take a very structured and disciplined approach. For this year, we're going to generate $180 million to $200 million, with $50 million going to debt retirement, which leaves a lot of opportunity for us. We already announced on the last call that we had repurchased $45 million before earnings, and then just mentioned the $14 million we have in funding for Redbox Instant in Q1.
So how do we think about our overall strategy, right? We're very focused on driving the business for the long-term, we want to profitably grow our core businesses. We want to have successful new ventures that we think makes sense to the consumers, but we're going to do it in the right balanced way. We also want to have opportunities, again, for acquisitions of limited size.
Fiscal policy, we intent to be a bit more conservative, right, but we want to really focus on driving strong free cash flow, and having a very attractive debt rating so we have access to capital markets as need be. That means staying under the 2.5x. We want to have a great liquidity and then return to capital. And as we're thinking about where we want to go now and in the future, right, we're going to target a minimum of $100 million of annual share repurchase, and we're going to size that based on how the business is doing, what opportunities are in the overall free cash flow generation. So just wanted to kind of give you a direction of where we think we're going as a company. Again, we see shares themselves as a good return good opportunity for return.
We also thought it might be very, very helpful to provide some 3-year targets. So this is something new to us. But we're very, very excited about doing it. And I think we're finally at the scale and the size for the Redbox business, that we're able to constantly do that. So as we look forward over the next 3 years, we expect 10% to 16% growth each year in revenue, 7% to 13% growth each year in EBITDA, 11% to 18% growth in EPS. Over the next 3 years, we expect to generate at least $600 million to $750 million in free cash flow.
We expect corporate CapEx to be somewhere between 2% and 3%, and again, we'll see kind of what the infrastructure needs are and that will come down accordingly. And then ROIC, as Scott mentioned, the goal of getting to 20%. Now again, this will move from year to year a little bit, but we see good opportunity to hit these on an annual basis.
We also thought it would be really, really helpful to provide some targets for the individual lines of business. So as we think about Redbox and mention this in terms of thinking about instead of -- with the big installs over, with installing 22% of your base last year alone, maybe not thinking about rent per kiosk per day and revenue for kiosk in the same basis, but thinking about how do you grow the business system-wise? We're very focused on, over the next 3 years, each year growing rentals themselves by at least 5% to 10%. In addition, that just means growing revenue from the initiatives as well as continued shift towards Blu-ray, of 8% to 17%. With -- as it relates to margins, right, there's a range there of 20% to 25%, and that's going to move based on the type of content, the type of studio it's coming from, and the opportunities that we see there, but we think there's opportunity for us as we continue to grow the business and it continues to mature, an opportunity for us to continue to improve margins within the Redbox business.
And then CapEx will continue to come down as we think about slowing down the installs even further in 2014 and beyond. What we'll do is be much, much more focused on, again, taking that existing footprint and reprioritizing to the right location. In the Coin business, for a lot of things that Mike talked about, we're excited, we think it's going to grow between 4% and 7% on an annual basis each year.
Segment margin is 30% to 33%. It's really important to know that as we bring the Alula business in, it's going to impact -- margin's going to depress them a little bit, but it's simply moving it from the new ventures business over to the Coin business, but again, very strong, healthy margin. And then CapEx, a little bit higher. Again, they're just a bit over machine, as well as the planned extension of Alula within that. And then you've got new ventures there by the end of year 3, we expect it to represent 10% to 15% of the total revenue.
I think we're going to take 1 minute or 2 to reset , and then we're going to go ahead and open up to Q&A. So if we can have all of the presenters please come up.
Okay, so we'd like to open up to your questions. Right back here, Paula...
Here's a question for Anne. Anne, I thought your presentation was very professional and very enlightening. Just want to know what's different now. I mean, since when you came in, you're focusing a lot more in analytics, you're talking about ARPUs. You're thinking about things that we haven't necessarily heard from this company. So can you talk a little bit about what you found when you got there, and what you're seeing going forward?
Sure. Truly, what I saw was a business that had been focused on growing through expansion of footprint and had done a ton of smart things along the way to build good relationships, build -- deliver on the strong value preposition that then gives you customer permission and loyalty, and I don't think -- I always think those were the right things to be doing at the time. I think the pivot now is to say, "Okay, keep doing all of that great operational efficiencies, keep delivering and add to it now a deeper ability to mind the assets you have with the customer." So before I got there, the organization was thinking through how to start deploying CRM, how to think about personalization. So coming to the [indiscernible] part of my career, looking at things through a customer lens, that's just the focus we're taking now. And that's -- those are the dialogues we're having. How do you look at that kiosk experience through the user lens? How do we extend the brand and again, these were -- I can't take any credit for things like tickets or digital, right, well underway. I think what I can do is help kind of accelerate that and bring the company new ideas in how to build the business and the brand for that customer lens. But I talked about the team. I think Wicked smart people. What really, really sort of to make that pivot, I think for a lot of businesses I've been in, that might be hard, and you might need a talent trade out. I don't see that, right. I see smart people who are quickly excited about the opportunity to grow the business in a new way.
Paul D. Davis
The thing I would add is, we took our time. When Mitch left the business, Mitch had done a great job, but we felt like we knew that there would be eventual slowdown of the kiosk add and then we really wanted to work hard on the assets and get more out of what we had. So we specifically shifted focus and said, "Well, let's go find someone who's very consumer-centric, someone who really understands the marketing, because we knew we had these tremendous assets and we're very fortunate that Anne -- we're able to find her and convince her to join. She's been a wonderful addition.
And the next question, Beth, you want to -- there was someone on that side now? I can't see back there. Mario?
On the new ventures, I was wondering, is the CapEx a function merely of the number of kiosks that are going to be built in a particular areas? Is there anything we should think about there? Is there SG&A or overhead that's associated with new ventures as well? And then, cumulatively, the investment in new ventures, if you make some estimates through this year and next year, it ends up being a fairly big number and that sort of begs for a return eventually on net capital. So I'm wondering if you have a target on that, or a timeframe, because the number does get larger over time.
Paul D. Davis
Yes, I think I'll start and then Galen and Scott, if you want to pile on. I think, as you think about the CapEx number, yes, it's largely kiosk related. Of course, as the kiosk gets developed they come down per kiosk over time, so you see some benefit through scale. But then, in addition, there are other things, of course, that we can capitalize if we continue through this development cycle. But the majority of the CapEx is based on kiosks. In terms of G&A, that does come through in the segment reporting in terms of how we're actually allocating dollars to the business. I think that's a pretty clear picture. And to your point on return, absolutely, we get it. That's the whole point of what we're trying to build. As we go through that trough of investing in the businesses, accelerating through that, coming out and actually accumulating EBITDA is what we're all shooting towards in the near term. So I don't know if...
No, I think as Paul said, I mean, absolutely working towards rate of returns, right? We want to be focused on getting to the 20% ROIC, and as I mentioned, it may move around a bit just depending on the particular year and what you're investing in. But long-term, we see an opportunity to continue to grow the business very profitably and we're only doing it because we think it's the way to drive, again, both top and bottom line. If we don't see the right returns on the new ventures, we've had the history of shutting them down and we'll continue to have a disciplined approach.
Paul D. Davis
I mean, clearly, half of our growth over the next 5 years is coming out of the new venture side of the house, whether that'd be internally developed or it could have acquisitions in between there. And that's focused on growing with the right level of return, so we're not investing the money just to have fun or invest money, because we think it's going to come to the right return. And we're putting a lot of pressure on David and the team to make sure we get that return and not out at the end of year 5 with that return year-end, much near end than that.
The next question actually comes from our listeners via webcast. If you have a 3-year guide, what is meant by core EBITDA, core EPS growth? Does that exclude new ventures?
Good question. So the core EBITDA and EPS was really to adjust for some transaction-related expenses as well as to separate out the 35% ownership stake we have in Redbox Instant. So yes, it's nice to actually watch stuff roll through, but the 35% comes in at the bottom line. So new ventures is absolutely included segment of the business overall. So it is included in our guidance on EBITDA and EPS.
The next question from the audience here. Eric?
So a couple of questions on Redbox Instant. I know the Verizon CFO mentioned a couple of weeks ago at a conference that he expects that to start contributing to profitability for Verizon in 2014. Is that a view you that you would share for Coinstar with the $25 million contributed last year and this year? I guess if you start looking to '14, would you expect your capital contribution to meet the increase beyond that level or does the business start becoming self-sustaining cash flow positive? And lastly, same with Redbox Instant, with the 4 rental nights per month, I know you're assuming some level of breakage and that consumers don't use all 4 rental nights per month. What is that kind of break even point for Coinstar and kind of what's been the history you've seen so far to the first couple of months of the beta?
I'll take the second one, you can take the first one. So it's super early. We're just moving people from trial into paying and so on. So we can't really say. I hope in a lot of respects that we don't have breakage, right? Part of what I think is advantageous to us about Instant is the idea of driving a customer to be thinking about the value that they have at the kiosk very regularly. And if we will get 1 rental night, right, our basket size is above 1 and our rental nights out that is above 1 so there is, we believe accretiveness to the entire proposition. And way too early to give you any feedback on specifics.
So the thing about funding requirements, I think the business model is so different than what others have done where it really is geared towards generating profitability much, much sooner. And obviously because we're not doing fixed content that, as our subscriber base grows, we don't have as much upside. But again, what was very important for both us and for Verizon was to have a profitable solution, a short path to that profitability, and so as we think about what we're spending this year, it's really again about building out the product, building the subscriber base, but then it starts to take care of itself and so you would expect capital contributions to come down. Having said all that, right, there may be unique opportunities that we have that as it worked with our partners, we say, this is something we should do, which really help drive the business or grow returns overall. So again, we'll need to stay flexible on that, but absolutely in terms of building and scaling, it's really what we've spent the last year and this year.
Next question, is anybody on that side, I can't see. Ron?
Ronald Bookbinder - The Benchmark Company, LLC, Research Division
Ron Bookbinder with Benchmark. Mike, could you talk about the penny business, and how you see that going forward? And then secondly, could you talk about the gift cards? And what sort of fee is it attached to the gift card exchange, and will that whole business be consolidated into the Coin machines?
Michael J. Skinner
Let me make sure I got the first question, the penny? So the Canadian penny activity?
Ronald Bookbinder - The Benchmark Company, LLC, Research Division
Yes, and the speculation on the U.S. penny business?
Michael J. Skinner
So we're about 18 months into the Canadian government's decision to eliminate the penny from their currency. They're not demonetizing, they're just simply eliminating it over time. And we've been actively involved with them and from the very get-go, we have a strong partnership there and so we've been at the table as they've walked through their plans and we've seen a continual uptick from a consumer return standpoint at our kiosk. And certainly the roll out of the Safeway kiosk, which give us the western penetration, was very well-timed for this. The big news really happened about 1 month ago when the Canadian government allowed retailers round. So part of eliminating the penny is either you have to round up everything up or round everything down. And so on that day, we saw massive increases in our penny business. And that is continuing, and so -- and probably will over a period of time as consumers begin to withdraw the coin out of the marketplace. There's no reason for them to have taste to it because they're not going to demonetize it, but there is a move on the consumers' part to get pennies out of their homes, out of their businesses and we're seeing that uptick at our equipment, which we enjoy a lot. As we think about other countries, we do believe every country is watching the Canadian activity right now. We don't expect to see any major move in the U.S. It's been good for us to be able to experience with a move like this. And Canada, it's a smaller market for us. We have fewer kiosks that we're working through, and so this is going to give us we think a great foundation and really prepare us for being able to handle a move should the U.S. government decide to move in that direction. But we've got no indications from them that there's anything imminent or on the near horizon. On gift card exchange front, one of the things -- thank you for asking the question because it gives me a chance to deal with something I didn't do at my presentation. We have Walter Paulsen here who's the General Manager of that business and a kiosk -- his place is just outside the lunch room. So you'll have a chance to actually use the product, see the product, have it operate and interface with Walter during that interaction. And I failed to mention that during my presentation, and thank you for giving me the chance to clean that one up. In terms of the economics, we are -- it depends on the card that the consumer has that they're bringing through. Typically, it's between 65% and 80% is the offer back to the consumer. That will vary over time. It varies based on inventory. It's constantly updated and managed by both Coinstar and Blackhawk through their card pool business. And then ultimately, those cards -- we're selling those cards back to Blackhawk and they're taking responsibility for them from that point. So it's a very nice model for us. It's a very simple technology. And it's a very clean financial structure.
I think one of your questions is regarding the Coin machine , right now we're testing out as a separate kiosk and we'll keep doing that and we'll look for opportunities to see where -- do we want to integrate it into the coin machine in certain situations. And where the customers, can we retrain the customer to go there for gift card exchange as well as the other things that we have been doing? But right now, we are focusing more on the standalone kiosk and the test for the next several quarters.
Michael J. Skinner
Most of the technology is very similar. The voucher is the same. Well, there's a -- lot of advantages that we get as we think about the opportunity integrate, but right now, we're perfecting the model. We think a standalone kiosk is a great direction to go. And as appropriate, we'll look at being that into the coin kiosk, and although it's still too early to tell, there may be opportunities for both standalone as well as integrated as we look to the future of that business.
So the next question from our folks on the webcast related to Rubi. First of all, how long on average have the Rubi kiosks been opened? And for those kiosks, what's the average CapEx margins and time of payback on CapEx?
I think as we think about those elements -- hit them one more time, so let me see if I can give them anything.
Okay. So first of all, how long had they been open, the average kiosks?
Yes, you saw the numbers, we're in 80 plus as of January. We started the year before that beginning of the year around 50. And so they've been opened for more than a year, 50 and then of course the other is 30 plus have been filtered in throughout 2012.
And then basically seeing its economics on CapEx.
Paul D. Davis
What we've talked about is we expect the coffee kiosks to be a bit below the coined kiosks and CapEx and that the margin should be in line -- the EBITDA margin should be roughly in line with where Redbox is today. And so that's where we talk about as we got more kiosk in the marketplace that we'll move on. Certainly as that business becomes a standalone business, we'll be providing much more details around that as we evolve into that.
Questions from the audience here. Right back here, Paula?
Thank you for the disclosures on IRRs. I think it raised 2 questions for me. One is, given Canada's 20 to 30, I'm just curious, what the thought process of deploying there is given it's substantially below were both Redbox U.S. and Coin is? And then second of all, you've historically talked about the seeds moving to meet or exceed the IRRs of your existing businesses, and given that your existing businesses are 60 to 80 for the most part, I'm curious if we can extrapolate that to the new ventures, or if you're thinking more on the 20 to 30 range.
Yes, on the first 1, we think Canada tracked the market. Listen, the IRR there is really based on what we're seeing today. And so we're not a known brand in Canada within the Redbox business. Because there's an opportunity to continue to build that out to build that customer relationship. And so I think those IRRs will likely come up over time, but this is just our view today based on how they're performing relative to where the U.S. is. In the U.S., those IRRs are for what we expect to install this year. So our Redbox kiosk, some of the historical ones have had IRRs much above that. But I think that 60% to 80% is much more in the range. Some will be higher, some will be right around there for our new venture business.
Next question, Donna?
For those on the webcast, the question's about the tickets business and where, in 2 markets, how long did it take to build relationships there, and what kind of other dating factors are we thinking about? You know what, I think what's happened is not necessarily indicative of what it will take going forward, because we were introducing an entirely new business model into an existing ecosystem. So our team's been at it 1 year, and I have been very impressed with, in a relatively short period of time, right, this is a new project for us in '12, that we've been able to get some really interesting inventory and get up and in market. One of the great stories is there's some woman in Philadelphia who's the owner, whatever, of the Philadelphia Craft Fair, right, and she saw that we're selling tickets and so she called our customer service line to say, "How do I get my inventory on your machine?" So there will be things that require multi-month long time negotiation, and then things that are very serendipitous like that. We're building open APIs, so that people can interface with us and bring their inventory to us very seamlessly, heading forward. I think before we roll out, significantly roll out more markets, we want to see transactions with the kiosk, and they're really growing at kind of a predictable pace. We also have some of our national players right now with ticket inventory holders are also making their tickets available on our website. So there's also a nice web component to this, but getting it really more scalable at the kiosk level would be one of our dating factors. Next question? Beth, over there, Paula. Either one.
I just had a question on the Redbox stats you've put out. I'm just trying to understand with the 480 million rental visits and 42 million customers. That sort of implies 11 million transactions per customer, but it said 6 million per card. I just want to understand the delta.
So there's a lot of variance in the amount of frequency. So of our 42 million customers, about 1/3 of them, right, are active and come multiple times per quarter. A lot of them are coming once or twice a year. So one of the things on the break I talked to people about was, over the course of this year, I would aspire to get us a lot crisper on understanding these customer segments, understanding better frequency numbers there, and being able to communicate those. Continuing to think through our business as a recurring revenue business is something that we're looking at how to do. So I think our numbers are going to get stronger and stronger in terms of your ability to help understand how the actions we're taking will drive that frequency.
And for the 4 night for the Redbox Instant break, do you have a sense of how many of your customers rent more than 4 nights per month, versus how many customers rent less?
Not more than I've told you right now. And I think on -- I think average, I mean I know this is how you guys have built your model, but I think on average, it's really, really deceptive, right? What we're finding is a lot of different behavior patterns. And for us, that's really instructive because then we can get in and you would do something different to drive someone who comes 6 times a month than someone who comes 6 times a year, so we will go after that.
And I think we're making good progress on it we have a lot of information not ready for prime time at this point, but what of the things that make Redbox Instant very interesting, you're moving what is a majority of the customers that are coming somewhere between 2 and 4 times a year, to getting them 48 opportunities to come to kiosks. And so there's great opportunity to drive more throughput on the kiosk. It helps to drive more things that we're doing, whether it'd be with tickets and other things that really allow us to drive with. Anne was talking about around ARPU and shifting the game by driving about getting more revenue out of each kiosk and then eventually getting more revenue out of each consumer as well.
Russell, you had a question?
Yes, so we are still going to be -- so for those in the webcast, the question is, "What is happening in the overall rental market relative to our expectations to grow 5% to 10% systemwide?" We think there's going to be, in the overall category, right, they're still be a shrinking of the market that will come down. It's going to be a lot slower than what it's been because a lot of that capacity has already come out as brick-and-mortar have closer over last few years as other competitors have moved away from focusing on the DVD. So we think there's a bit of a flattening out. The expectations for -- we expected, obviously kiosk is going to continue to grow. And so we'll take up a lot of that capacity that's coming out of other channels. So it's flat to slightly down. But obviously, from a market share perspective, we expect it to continue to grow each year as we continue to build the business out.
Yes, I mean it's similar to what's happening in 2013, where it's the investment in the future to get to the $4 billion that you're spending more now in the short term to drive that long-term profitability.
And we have time for one last question, Beth, if you want to just grab somebody back there.
Mine is just a quick follow up to the question that was asked. My question is so -- and it has to do with operating leverage in the business. You put out a 3-year plan. As you think about the plan, every year is different and you're giving an average, but how should you suggest those of us who are trying to think years out because it's wonderful to see there's growth, but growth really matters if it translates to profitability. So how do you think about the ramp towards, as you think of the time frames in year 3 should you have EBITDA growth that accelerates above revenue growth as you move forward, because investment should start to have returns?
No, that's exactly right. So as you think about the curve there, right, so you've got more investment in the nearer term and new ventures as those start to generate the result, it starts to have a lessening impact on the overall consolidated view. We think there's opportunity to continue to drive margins within Redbox, and there's opportunity to drive margins within Coin. But obviously as we're thinking about what we're going to do with the Alula business and how we're going to grow that, that may depress that in the near term, right? So again, it's the ramp that you're going to see is going to go up over time.
We'll take that one last question. Was that Andy?
Andy Hargreaves - Pacific Crest Securities, Inc., Research Division
I was going to ask sort of a similar question actually, just a different metric. Just thinking about the about the return on capital target, and just from a big picture perspective, the target is higher than where you are right now, but right now, you have a massively successful business that had an arbitrage and that retail pricing and rental pricing, whatever, you could capture that arbitrage. None of the businesses that you're going into seem to have that same type of arbitrage. So how do you drive returns on capital higher than what you're getting right now?
J. Scott Di Valerio
The part of that is driven by the continued ramp of our core businesses, right? So again, increased profitability from those. And the native impact from new ventures that we have today, again, will be lessened over time. So we think the overall profitability will grow as we continue to invest that capital.
Thank you, Scott.
Paul D. Davis
I'm going to spend a few minutes on kind of closing out today. Hopefully, on what we talked about today, you can see how excited we are about the strength of the opportunities we have at Coinstar, and how we go about in a disciplined and structured way about attacking those opportunities and in executing on them, and then delivering on both revenue, profit, cash flow and return on invested capital across the stacks.
Key takeaways, we have an enormous opportunity in this business. We talked about our total addressable market across our 6 sectors being $16 to $20 billion, $16 billion is the sweet spot, $20 billion when you add in the adjacencies. Talking about we're in a unique position to drive this space. There's not another business that's in the same position as we are, with our experience in automated retail, with our relationships we have with our retail partners, with the relationships we have with our content providers, with the relationships we've built out across a number of different areas, whether it will be our manufacturing, our design partners and the like. There's not another company that understands the consumer and has the relationship built with the consumer that can drive this business in the way that is going to be very successful and to take advantage of this large market opportunity that we have.
We also are very focused and continue to stay focused around delivering stakeholder and shareholder value. And we do that, again, through driving return on invested capital through making sure that the ecosystem is working, and it is continuing to grow and be healthy, and to really do it in a way that's going to be good for our employees, good for our retail partners, good for our distribution partners, and really good for our overall foreign investors. So at the end of the day, we're staying focused around those key aspects of the business.
And of course, where we started off with, 5 numbers that I'd love everybody to walk away from here, and remember, if we're going to work on doubling the size of this company to $4 billion over the next 5 years, there are 3 key trends, mega trends, that are going to help drive and give us the tailwinds to do that, which lines up and again. We're positioned, like no other company, to be able to come after those trends. The 6 sectors, the market sectors that we're in, are right in line with some key growth initiatives and also in line with where trends are moving in the company. $16 billion of market opportunity in the sweet spot that we see today. $20 billion in the adjacencies, and we're going to do this all while driving return on invested capital across the stack at 20%.
We're a company that is very focused on execution, very focused on discipline in how we invest and how we manage our business, and very focused on returning to our investors the amount of the return that they deserve and return that is expected. We are very, very focused around that.
The entire company, and Mike mentioned this, the entire company has 3 commitments: create an enduring company; delight our customers; and find a better way, from the person that comes out of college that's interested to the person that works filling our kiosks to David Veensta, to Galen, to myself, to Mike to Anne, we have the same 3 commitments. And those 3 commitments are around driving overall value for our shareholders and building a great company. And it's great to build a great company, but you've got to do that to get the return for the shareholders. There's not another company that's positioned to come after the trends that are going on in automated retail, the trends that are going on in consumer space, better position in Coinstar to do that.
So with that, I really want to thank you for taking time today, and I know everyone's busy, and really appreciate you doing that. And we have lunch starting now in Ford [ph] and you certainly will have time to take a look at the kiosk and get some great cup of coffee. If you bought some gift cards, you certainly can try to exchange those today. And I know many of you are NASCAR fans and you can get some tickets on -- buy some tickets at the Redbox kiosks.
Again, thank you for your time and thank you for your interest in Coinstar.
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