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With the rumored launch of Redbox’s online strategy drawing closer, speculation about what form it will take and how competitive it will be with Netflix is on the rise. Forbes has analyzed the relative advantages and disadvantages of both companies, and has concluded that Redbox would have to move at “sonic speed” to catch up to Netflix in the streaming business. Here is some of their reasoning:

Redbox’s Small Library
In order to compete with Netflix’s library of nearly 20,000 streaming titles, Redbox will need a substantial amount of content of its own. Says Forbes:

“Redbox primarily offers newer titles, making the company‚Äôs $1 rental charge a great deal for customers. but to succeed in the streaming video market Redbox will need to vastly increase the size of its library.”

Netflix’s Millions of Compatible Devices
Besides an enormous library of content, Netflix also enjoys a huge lead in device penetration, with more than 50 million devices in the gaming console segment alone. Just today, Apple announced Netflix compatibility with its updated Apple TV device. Other companies that Redbox could potentially partner with, such as Sonic Solutions, have nowhere near the device penetration of Netflix.

Does Redbox stand a chance if and when it dips its toe into the streaming stream, Insiders?
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Swing by the comments and let us know what you think.

(via Forbes)

11 Responses to “Redbox Online Strategy Would Face a Formidable Foe in Netflix”

  1. Visitor [Join Now]
    anon46 [visitor]

    anyone with enough cash can enter the market. redbox, amazon, hulu, apple, sony, any could destroy netflix.

    • Visitor [Join Now]
      firstlawofnature [visitor]

      You think the past 8 years have been a cake walk for netflix? All the above folks have been trying to ‘destroy’ netflix for years. Netflix has built a defensible business that won’t be easy to replicate.

      If redbox comes in with a differentiated hybrid service that rewards loyal customers of its kiosks then maybe it’ll be interesting.

      • Visitor [Join Now]
        Consumer [visitor]

        Redbox has to come into this cheap and easy. Customers love cheap and easy. Look at Wal-Mart and McDonalds if you don’t get it. The streaming has to be on a device already in the customers hands and it needs to work with the kiosks. And the most difficult part is that it really needs to be priced less that the $8.99 plan with Netflix.

        • Visitor [Join Now]
          MH [visitor]

          So much continues to change. It wasn’t that long ago that NETFLIX destroyed Blockbuster and other rental stores when users no longer had to travel to the store before a movie was due. Heck, the way Blockbuster screwed you for late fees I’m glad NETFLIX came along. Any company with some foresight and investment capital has a play in the entertainment arena and any company who rests on it’s laurels is at risk.

  2. Visitor [Join Now]
    Joe Schmuck [visitor]

    I thought I would post this since Michael or Shane Won’t.
    Is Coinstar’s Cash Flow Just For Show?
    By Seth Jayson
    September 3, 2010 |

    Earnings’ unreliability is one of the reasons Foolish investors often flip straight past the income statement to check the cash flow statement. In general, by taking a close look at the cash moving in and out of the business, you can better understand whether the last batch of earnings brought money into the company, or merely disguised a cash gusher with a pretty headline.

    Calling all cash flows
    When you are trying to buy the market’s best stocks, it’s worth checking up on your companies’ free cash flow (FCF) once a quarter or so, to see whether it bears any relationship to the net income in the headlines. That brings us to Coinstar (Nasdaq: CSTR), whose recent revenue and earnings are plotted below.

    Source: Capital IQ, a division of Standard & Poor’s. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. TTM = trailing 12 months.

    Over the past 12 months, Coinstar generated cash in the amount of $82.1 million on net income of $64.5 million. That means it turned 6.1% of its revenue into FCF. That sounds OK. But, it always pays to compare that figure to sector and industry peers and competitors, to see how your company stacks up.

    TTM Revenue
    TTM FCF Margin


    Comcast (Nasdaq: CMCSA)

    AT&T (NYSE: T)
    13.2% (Nasdaq: AMZN)

    Source: Capital IQ, a division of Standard & Poor’s. Data is current as of last fully reported fiscal quarter. Dollar values in millions. FCF = free cash flow. TTM = trailing 12 months.

    All cash is not equal.
    Unfortunately, the cash flow statement isn’t immune from nonsense, either. That’s why it pays to take a close look at the components of cash flow from operations, to make sure that the cash comes from high-quality sources. They need to be real and replicable in the upcoming quarters, rather than being offset by continual cash outflows that don’t appear on the income statement (such as major capital expenditures). For instance, cash flow based on cash net income and adjustments for non-cash income-statement expenses (like depreciation) is generally favorable. An increase in cash flow based on stiffing your suppliers (by increasing accounts payable) or shortchanging Uncle Sam on taxes will come back to bite investors later. The same goes for decreasing accounts receivable; this is good to see, but it’s ordinary in recessionary times, and you can only increase collections so much.

    So, how does the cash flow at Coinstar look? Take a peek at the chart below, which flags questionable cash flow sources with a red bar.

    Source: Capital IQ, a division of Standard & Poor’s. Data is current as of last fully reported fiscal quarter. Dollar values in millions. TTM = trailing 12 months.

    When I say “questionable cash flow sources,” I mean items such as changes in taxes payable, tax benefits from stock options, and asset sales, among others. That’s not to say that companies booking these as sources of cash flow are weak, or are engaging in any sort of wrongdoing, or that everything that comes up questionable in my graph is automatically bad news. But whenever a company is getting more than, say, 10% of its cash from operations from these dubious sources, investors ought to make sure to refer to the filings and dig in.

    With questionable cash flows amounting to only 2.4% of operating cash flow, Coinstar’s cash flows look clean. Within the questionable cash flow figure plotted in the TTM period above, stock-based compensation and related tax benefits provided the biggest boost, at 0.7% of cash flow from operations. The biggest drag on FCF came from capital expenditures, which consumed 66.7% of cash from operations.

    A Foolish final thought
    Most investors don’t keep tabs on their companies’ cash flow. I think that’s a mistake. If you take the time to read past the headlines and crack a filing now and then, you’re in a much better position to spot potential trouble early. Better yet, you’ll improve your odds of finding the underappreciated home-run stocks that provide the market’s best returns.

    • Administrator
      Michael [administrator]

      Why would you think we wouldn’t post that? It is actually on the list that Shane will be posting shortly.

      However, this really isn’t the right place for this. If you have stories you are interested in seeing posted, use the forum.

  3. Visitor [Join Now]
    Al Chirico [visitor]

    20,000 streaming titles? Really? I just signed up for a NetFlix trial on the WII gaming console and I don’t see anything even remotely close to 20,000 titles. Most of the streaming titles offered are years, sometimes decades old. Very little current movies. Needless to say, I have been very disappointed with the streaming content, which appears to be just a fraction of the regular NetFlix titles that can be mailed.

    Also, NetFlix demands a constant, full 1.5 mb connection or it goes into a “Receiving” (buffering) mode which, in my experience so far, can lasts minutes.

    If RedBox can offer its’ more current content, and do it in a cost competitive, reliable way, then NetFlix Streaming service is definately vulnerable.

  4. Visitor [Join Now]
    Sweed [visitor]

    hey… your grammar is sweet for my brain lol

  5. Visitor [Join Now]
    Javier Poli [visitor]

    Researching this for a while now – i figure luck is far more advanced compared to search listings…

  6. Visitor [Join Now]
    kimberly [visitor]

    I agree with Al Chirico i have had Netflix Streaming through my Xbox 360 for 6 months it plays alot of old movies and nothing newer i cant even get Bridal Wars or any Jurassic park movies. If Redbox can stream newer movies cheaper then 8.99 a month I would switch