Coinstar, Inc (NASDAQ: CSTR) is a leader in self-service coin counting in the U.S, Puerto Rico, Canada, the U.K and Ireland. The company has close to 20,300 coin counting locations globally. It is the only multinational entity that owns and operates a fully-automated network of coin-counting kiosks, all of which are self-serve. The company processes around 50 billion coins every year that amount to close to $3 billion. Coinstar is also in the video rental business, with its signature Redbox kiosks located in thousands of locations.
Entertainment retailers are up in arms with each other in a fight to add original content and new streaming services in a bid to attract more viewership. The capital intensive and increasingly competitive market is making the going very tough for companies such as Coinstar, Inc. and Netflix, Inc. (NASDAQ: NFLX).
Coinstar shares dropped drastically last week in the wake of its disappointing fourth quarter results and its projected profits don't seem to be very promising either. However, investor sentiment is not the worrying factor in this instance. Streaming movies have been the domain of digital biggies like Netflix, Inc. and Amazon.com, Inc. (NASDAQ: AMZN) who have had a head-start in this particular niche. But the Redbox owner seems to have its bases covered. It is head-butting its way into the video streaming business with a heavy-duty partner Verizon Communications, Inc. (NYSE: VZ) with the launch of a new website named RedboxInstant.com.
Though Verizon holds a 65 percent stake in the Redbox venture, Coinstar stands to gain substantially as well. The service, which is currently in beta stage, will be priced at $6, $8 or $9 per month of usage depending upon the content or the range of formats that are chosen. These price points will give Coinstar an upper hand in the market. RedBox is concentrating not just on pricing, but on content as well, but for the moment is not able to offer much more in that area than what Netflix and Amazon are offering. Coinstar will have to work hard at proving that they are a notch above Amazon and Netflix in the streaming domain.
Coinstar, however, is making headway in its home-domain; self-serve coin counting. Through a strategic partnership with PayPal customers using these kiosk's will be able to add paper currency or coins into their PayPal accounts and, or, withdraw from them and transfer funds to another Paypal account. At the moment this functionality is available at certain kiosks in Northern California, Texas and Ohio. The initial tests at Dallas kiosks were very promising as PayPal is becoming a preferred option for safe online money transactions. The convenience factor that has been added for Coinstar customers to add coins and paper money and withdraw or transfer at will is a significant move for the company.
Though the recent sell-off in Coinstar may not necessarily have given investors a chance to get in at a particularly good price, the company is a fighter and it is not leaving anything to chance. It is testing new waters and forging new partnerships. All of this, including the fact that it has a monopoly in the self-serve coin counting market and has been providing customers with steady services and returns over the years is a clear indication that investing in Coinstar is definitely a smart choice.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.