Redbox and Amazon, two unlikely partners at first glance, should team up to offer a subscription-based streaming model, according analyst Eric Wold with Merriman Curhan Ford. Wold believes that the two companies, neither of which currently has a streaming offering, could make a powerful combination if they joined forces.
Said Wold:
“I’m suggesting a partnership for a subscription model where subscribers would have access to both digital rentals via Amazon and physical rentals via Redbox . . . While we do not believe Redbox necessarily needs a digital strategy to be successful, we believe it has become necessary to offset concerns about the demise of DVDs and obtain a more appropriate valuation multiple,”
By getting access to Redbox’s network of tens of thousands of kiosks, Wold believes that Amazon could avoid the sales tax issues involved with having a physical presence in most states.
A perfect partnership or a pipe dream, Insiders? What would the benefit be to Redbox to work with Amazon on such a venture?
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And do you agree with Wold’s opinion that Redbox doesn’t necessarily need a digital strategy?
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Visit the comments and tell us what you think.
(via Home Media Magazine)
Redbox is the missing link for many aspiring digital players. No other company has a physical nationwide network to leverage off of with the sole exception of netflix. Whether anyone spots the value that they could bring to the table is another story.
Wold is sounding increasingly desperate as he tries to pump this dog.
Amazon does not need Redbox. Redbox brings no value to the table. Redbox can barely afford to keep things rolling much less pay Amazon to let their customers stream.
List all the companies that have a nationwide footprint for renting physical media.
List a reason why Amazon should give a crap.
So the answer to my question is netflix and redbox. That’s all of them. BB could be counted possibly but they are too busy managing a shrinking business and have franchised stores that they don’t completely control.
Netflix’s streaming business is considered the most promising model out there and yet it would not exist without the physical by the mail piece. Netflix combines digital with physical and has the #1 service. Redbox would be the only other possible partner for a hybrid service. So maybe amazon wouldn’t give a crap but I think it’s possible that someone would.
Yep, some other sucker might. Amazon is too smart to tie themselves to a Redbox anchor though.
So you don’t see any value in a hybrid service. No surprise there.
In a new hybrid service weighed down by a barely surviving physical delivery method? Only the truly desperate would even consider such an option.
You are too much. First figure out how much cash Coinstar is generating before attaching the barely surviving label on them.
Can you name another company with a national footprint for physical rentals? If someone else believed hybrid was the way to go, as Netflix does, who would make a good partner?
Netflix evolved into a hybrid. They did not start that way.
No one wants to go back to square one.
same reason Walmart gives a crap – Redbox drives business. In amazon’s case, not only would a combo streaming and physical plan drive subs to it, it will provide it greater leverage on streaming deals
And would you like to explain how Redbox or Amazon makes money off of this merger? Either Redbox has to pay Amazon for streaming customers (which they can’t afford to do) or Amazon has to pay Redbox for DVD rental customers (which makes their subscription fee valueless).
This is a lose-lose proposition put out by the biggest cheerleading analyst out there because he knows that the company he is pumping is going nowhere. He wants to hitch it a successful company.
Desperation.
You are not very creative.
It costs netflix money to offer streaming correct? They don’t charge anything extra for it correct? Why then do they offer it?
Netflix, like Amazon is looking to the future. They would prefer to be out of the physical side of DVDs altogether. Why would Amazon want to look to the past?
The problem with the Redbox/Amazon scenario is throttling on the physical side of things.
Either Amazon gets soaked because too many physical rentals take place or Redbox gets destroyed because all of their best movies are out and paying customers can’t get them or they come out with some sort of middle ground which looks crappy in comparison to Netflix.
Lose-Lose-Lose.
Because a hybrid model is the winning model for the next decade. If you play in 100% physical you miss the future. If you play 100% digital you miss 10 years of transition. Netflix understands this. Will anyone else get this? We’ll see.
‘Either Amazon gets soaked because too many physical rentals take place or Redbox gets destroyed because all of their best movies are out and paying customers can’t get them or they come out with some sort of middle ground which looks crappy in comparison to Netflix.’
Nah. Wouldn’t work like this at all. You don’t get it which is fine with me.
Feel free to explain it then.
Transition is happening a lot faster than 10 years.
I’m still waiting for you to tell me how much cash coinstar has generated thus far in 2010.
Faster/slower doesn’t matter. It’ll be a hybrid market for at least a decade. It can be no other way.
You are misunderstanding the nature of the hybrid market.
Take a look at what happened to BB when they tried to hybridize things.
BTW, I’m still waiting for you to even understand what you are talking about before I’ll even consider looking at your question. You keep asking me something that you have no idea what it means.
Sure netflix evolved. So what? Redbox may evolve into a hybrid player as well. You don’t get it or don’t want to get it and that’s fine with me.
$100mm…This is just like your insistence redbox is losing money. It is a fabrication on your part. If you go to the 10Q cash flow statement, take cash flow from operations less all capital expenditures you will arrive at a large positive number. If you can deny that then you might as well try and fly home tonight.
I completely agree that Redbox could evolve into a hybrid player. My point has been that Amazon would get no benefit from helping them become a hybrid player.
I was pretty sure you were talking about cash flow and that you were completely misunderstanding what cash flow means. Glad to see you confirm it.
Amazon or another would absolutely get a benefit by partnering with Redbox. You’re just too store centric to see it. That’s fine. The best idea you have is to raise prices. That kind of thinking is much too simple for the digital puzzle.
Did Coinstar generate real cash after all expenses and capital expenditures for the 6 months ended June 30th 2010? By generate cash I mean more cash in the bank for debt pay down, share buybacks or dividends at the end of the period versus the beginning of the period. If so how much did they generate?
If you answer with a number it’ll be a first.
Again, the moment you show any understanding of how accounting works will be the moment I even consider taking any of your requests seriously.
Feel free to provide any iota of information as to how Amazon paying Redbox helps Amazon earn money from streaming.
Should I be calling you Mr. Wold from now on? Is your secret finally out?
JS you don’t know jack sh*t. For the 6 months ended June 30th 2010 coinstar generated $73 million in cash after all expenses and capital expenditures. This is cash flow from operations less all capital expenditures. Doesn’t sound like a money loser does it? If you have another number or calculation please feel to share it.
Again, you are misunderstanding what cash flow represents.
I gave you the number, the time period and how I calculated it. You once again give nothing. How would you calculate cash generation (positive or negative) and what is your number?
Your obsession with cash generation ignores the temporariness of said calculation. It is not as valuable a metric as you seem to want it to be.
I’d hazard a guess that most businesses are obsessed with generating cash. If you are into something else that’s fine. At this point I take it that you are in fact conceeding coinstar does generate cash but that it is only a temporary phenomenon. Fine.
You got game like Kobe in dodging questions and numbers.
Cash flow is all fine and good but profit rules at the end of the day.
Speaking of dodging, I notice you have yet to detail how a partnership with Redbox will benefit Amazon.
Profits are the real deal now right? Unreal. You’ve said the opposite in the past.
As another poster said it would be the same reason walmart installs redbox units.
I’ve always talked about the importance of profit and the lack thereof in the Redbox division of Coinstar.
Walmart uses Redbox to draw customers to their store because it physically brings them to the store.
The opposite would be true for Amazon if they teamed up with Redbox. Awesome example FLON/Wold.
Redbox and Coinstar both have profits and generate cash. If you want to keep making a fool of yourself I’d recommend continuing to argue the opposite.
Unlike the ‘profit’ discussion I actually don’t think you understand how a VOD player would benefit from a nationwide physical network. Netflix understands this well. A digital player might consider partnering with a physical rental network if it believed it could drive usage and revenue. Simple as that. Netflix’s digital offering would not exist without the by the mail piece. Redbox has the potential to make a generic digital VOD service stand out.
Either you don’t understand the difference between the Netflix model and the Redbox model or you are being willfully ignorant.
It’s a very simple concept JS. I’m not saying it would be easy to execute but there is room for a second hybrid player in the marketplace. A nationwide physical rental network is a prerequisite for such a service.
Why should your lack of understanding of this concept be any different than your inability to calculate or discuss specific numbers as it pertains to coinstar. You never mention a number in a discussion and you’ll never understand how redbox might partner with a VOD player.
Again, I’m not arguing against there being room for a second hybrid player.
I’m arguing that it makes no sense for Amazon to pursue a partnership with Coinstar to create said beast.
I’m also arguing that the Rent-By-Mail allows you to naturally limit the physical media side of the transaction to control costs. Kiosks cannot do that without artificially creating a constraint which lessen the value of a subscription model.
Would you agree that a nationwide physical distribution network might advantage an aspiring VOD player? If you don’t believe that then it is logical that you would believe no one would be keen on partnering with redbox.
I suspect there may be a desperate VOD player out there that would be willing to hitch their wagon to Redbox. I also suspect Coinstar would be better off just buying said company instead of partnering with them.
The nature of the kiosk makes it very difficult for a partnership using a subscription-based model to work. The margins on the physical side are way too slim.
Exactly. VBG centric folks will not get this in a 100 years.
Amazon and Netflix are looking well past the VBG/Redbox present.
Amazon already has a VOD service
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You make less sense than FLON does!
I’ll agree with you only in the sense that anyone and everyone makes more sense that project weekly job news!!…..What the heck is this blogger talking about??? I just watched the movie The Oxford Murders that had a premise that if you keep connecting the dots eventually you’ll get to a provable fact. That’s a lot of dots I’ll have to connect to make sense of what Project is talking about!!! :-)
“[…]neither of which currently has a streaming offering[…]”
Uhhh I stream Amazon VOD movies straight to my TV all the time. It’s really quite convenient. So what are you talking about?
This would only make sense if both companies were going to offer a subscription service to access discs and downloads. Otherwise why would it matter if a consumer did a 1 time rental from either service? How does redbox benefit from an Amazon VOD and vice versa?
If netflix by the mail and netflix VOD were separate companies you could ask the exact same question.
Orange, meet apple.
Your comparisons suck FLON/Wold.
If they suck they certainly suck less than the analytical skills you bring to the table. Your inability to mix numbers into your points is consistent as it is pathetic. Pretending redbox will disappear because it’s losing money is a loser strategy. You’d do better for VBG members if you dropped the ‘can’t sustain pricing’ charade. Dressing up like an jack a** is entertaining for folks but doesn’t do anyone any real good.
The simple fact is that Coinstar can neither sustain said pricing nor intends to do so.
Flon, I think what John has been trying to get across all this time is simply that redbox is not the consumer friendly company that you and many others view them as. This point simply leads to why they are priced where they are, dominance & finally profitability. If they can continue at $1 a day for another year or two they may successful put the remaining video stores out of business, they will most certainly raise their prices because they will be the primary outlet for physical media rental. If they succeed in closing down all or even most do you really think they will stay at $1 per day? Funny thing is that all the consumers at that point will be left with is ATM’s that have 1/50th the selection of video stores and you will pay the same as the independent are currently charging. I do not speak for John this is my observation.
That’s most certainly not what JS is trying to say. Your argument is at least intelligent speculation about the future, I happen to disagree with your conclusion but at least there is a flow of logic. JS claims a profitable, cash generating business is losing money and in danger of soon failing. This is just plain foolish.
I believe it’s difficult to claim Redbox isn’t consumer friendly based off a possibility of a future price increase. I think Redbox has an awful lot of brand equity wrapped up in low prices so I think any price increase will need to be minimal. Mixing blu-ray and games in is a better way to raise prices anyway. I think Redbox will behave more like southwest and Wal-Mart over time on pricing. Both these companies drive out competition but their brand and DNA don’t allow for aggressive pricing even when the opportunity exists. To me Redbox is the epitome of consumer friendliness.
Dunno. Tee seems to sum up my statement pretty well there.
‘The simple fact is that Coinstar can neither sustain said pricing nor intends to do so.’
I think you summarize your own thoughts however misguided pretty well.
My apologies for assuming you were an intelligent individual and would understand what the statement meant.
Well labeling the low cost distributor redbox as a consumer unfriendly service based on the possibility of a future unspecified price increase is right up there with some of the all time dumb statements I’ve heard.
Well just wait until the price increase comes and then read the board responses for the moaning and wailing then.
We shall see. If they raise prices on 20% of the movies by 25% I’d hardly call that consumer unfriendly compared to the alternatives.
I see how Redbox would benefit. Amazon has servers in place and can handle the load.
I’m less sure of how Amazon would benefit. Amazon has a counter program in place. Redbox was talking subscription, ala Netflix and not Hulu Plus. Amazon (and the studios) wants you to pay per viewing period. Until recently it was expensive and difficult to get subscription service for anything (ask Pandora) much less movies. Possibly have a hybrid system could give them negotiation room with Hollywood, especially since Amazon sells new products. Maybe even Amazon could sell older titles from Redbox since they now have to destroy them. All that is just maybes though.
I think a better partnership would be Hulu and Redbox. Both are having issues with licensers now. Hulu would get better saturation with people who aren’t “webbies” and also have a physical presence to promote for additional / more traditional revenue. Their combined size and variety of options would give them more muscle. They could even keep the names separate. Offer free codes for Redbox as an incentive to purchase Hulu Plus. I’d like to see Hulu drop the in movie ads however.
I could possibly see Hulu and Redbox but that still seems improbable. Hulu plus will be a channel on my Roku box soon. I can also access this channel with my PS3 as well, plus the regular Hulu too. It has become quite hard for anyone not to be a “webbie” thanks to smart phones and media devices. Hulu plus problem is the ads, I mean I can watch regular Hulu with access to the same shows for free on my gaming systems; which hook to my TV. They cannot get more licenses because the way they work is through the ads; premium shows do not have ads. It is sort of a 360 because people have other ways of accessing that same service; so Hulu keeps running in circles. Redbox does not even have a good enough distribution deal it seems with their DVDs, imagine how it would be trying to get streaming; look at how much Netflix is paying NBC and others. Redbox does not have enough profits to sustain that type of venture so they need a partner, yet they are not lucrative enough for others to take the risk.
Only Redbox would benefit from this deal. Some of you bring in Coinstars profits as proof but those profits are not just Redbox; so Amazon would not be gaining anything, they would lose. Amazon currently offers VOD and episodes/seasons for set prices; often times they have special deals. They could easily offer a monthly plan with so many rentals or access to however many episodes a month. Why would they need physical DVDs? They have a program where they them buy back, this benefits Redbox because they no longer have to buy DVDs. Most times buying physical DVDs will result in a credit to try their VOD service. Amazon on Demand comes on a lot of devices, so if you subscribe to Netflix; you have the channel. What would Redbox bring them? Amazon could easily offer a rental system but so much technology has gone into media storage and convenience that this seems illogical.
The writer of this article is speculating and doing it wrong, if Amazon want to become more powerful they would partner with Netlfix. Netflix has the solid background and experience Amazon would need. I like Redbox because when I really am in the mood for a movie and do not want to wait; I can TRY them but a lot of people hate them. It seems that the free rentals were what pushed this service to having rented out so many movies; any talk of raising prices and consumers balk. More importantly what makes them think that Amazon wants into physical DVD business? Amazon has grown from a music and movie online store, to an everything marketplace with vendors. I mean, yes Redbox will need streaming if it wants to compete(not necessarily survive) but it needs to create it’s own type of service.
I liked this site much better when enough negative checks would censor both Flon & Small’s comments entirely. Bring that back!
I painted a room in my house this weekend. Watching it dry was more interesting than your comments.
No one gives an eff what you painted flop. No doubt you painted yourself into a corner you wretched bore.
I can’t say anything about the economic end of this whole thing. I read a lot of the earlier comments and just got irritated. All I have to say is this: I LOVE Redbox, and I LOVE Amazon. I had Netflix for a while, but hated it. I never use a VOD service of any kind, HOWEVER, if Amazon and Redbox were to team up and offer a hybrid subscription service at the lower prices both companies are known for, I would most likely subscribe. Someone said no one watches physical DVDs anymore. I prefer physical DVDs because – in my case – it limits set-up and allows my entire family to watch it at once. For everyone in my family to watch VOD at once, it requires a lot of set-up, which is no fun for anyone. If a Redbox subscription were to include VOD from Amazon, I would watch them, but I would not subscribe FOR that. There’s a lot bouncing around in my brain from what I read, and I have so much more to say, but I’ll keep my mouth shut (or my fingers still?) for now.
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