Shares of Coinstar (CSTR) ended the day down almost 1%, but Piper Jaffray�s Michael �Olson has a positive note out today about the firm�s challenge to Netflix (NFLX), Redbox Instant by Verizon (VZ).
Although the product is still in beta testing, Olson had a sneak peak at the product, which showed EPIX content available, �is a great first step in building out a quality content library.� He also notes that the low price point (as little as $6 a month) should become a competitive advantage.”
�We also believe the ability for users to rent new releases from kiosks, watch unlimited older content online, as well as rent and purchase movies a la carte online makes Redbox Instant a unique one-stop-shop for movies,� he concludes.
He expands on these themes below:
First Look at Redbox Instant Content Suggests EPIX Deal in Place. Based on Redbox Instant screenshots, we believe Redbox Instant has a deal with EPIX, which would provide hit movies such as Iron Man 2, Rango, and Thor. This would be the third deal struck by EPIX with an SVOD service (others being Netflix & Amazon Prime). Additionally, Redbox Instant recently announced a deal with Warner, where the studio will make available certain content to the service. Thus, while the EPIX content is a great start, we believe the library will get incrementally better. We believe the strategy of acquiring the content on a per-subscriber basis vs. a fixed fee payment is a key variable in Redbox Instant being able to acquire this quality content.
Pricing Undercuts Netflix. Redbox Instant will not offer TV content, which currently makes up the majority of Netflix viewership, but the relatively low price point of $8/month, which includes 4 DVD credits that can be used on new releases, appears to be a value vs. Netflix’s most comparable disc+digital plan at ~$16/month.
Redbox Instant May Be One-Stop-Shop for Movies. Based on the private beta test it appears Redbox Instant will cover almost every category of movie consumption. Through the service subscribers will be able to rent new releases from kiosks, watch unlimited older content online, as well as rent & purchase movies a la carte online (video game rentals also available through the kiosks). We believe this is the first onestop-shop movie service of its kind, a competitive advantage vs. others in the space. Additionally, the service will initially be available online, on Android and iOS devices, Xbox 360, and Samsung connected devices. It appears the full public beta test will be available in mid December. We continue to believe Redbox Instant has a potential incremental impact of 1-3% on CY13 revenue (see note dated 11/15 for details).
Olson has an Outperform rating and $64 price target on the shares.
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