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NEW YORK (
Coinstar's(CSTR) Redbox DVD kiosks could turn out to be the big winner from
Netflix's(NFLX - Get Report) subscription rate hike.
On Tuesday, Netflix announced that it was separating its DVD and streaming subscriptions, now charging $16 per month for access to both forms of content. This is a 60% increase from the prior rate of $9.99 per month. Users can gain access to each individual subscription for $7.99 per month.
While Wall Street has been praising the move from Netflix, customers are enraged, with many claiming they will cancel their memberships completely as a result.
>Click here to take our Netflix price hike poll.
This could benefit for Coinstar, which has been trying to ramp up its offerings to better compete with Netflix.
"For those consumers that request only a limited number of DVDs per month from Netflix, but still see value in accessing streaming content, one option would be to downgrade to Netflix's $7.99 per month streaming-only plan and then rent individual DVDs from Redbox kiosks at $1 per night," Merriman Capital analyst Eric Wold wrote in a note.
Netflix, it seems, is purposely forcing users to move away from DVDs and to streaming content, leaving its share of DVD rentals up for grabs.
>7 Netflix Deals: Will Content Costs Bust Its Bottom Line?
Another potential tailwind for Coinstar is the possibility of
NCR(NCR - Get Report) exiting its Blockbuster Express DVD kiosks. According to PiperJaffray analyst Michael Olson, NCR recently indicated that it is exploring strategic alternatives for its entertainment business, which could mean the sale of the kiosks.
"After a year of delayed studio deals, aggressive management guidance and inconsistent earnings results, we now believe positive momentum is finally back on Coinstar's side and Coinstar's shares are poised to continue their recent move higher," Wold wrote in a note. "We believe Coinstar's valuation multiple will expand further with additional positive earnings surprises in the coming quarters, further DVD market share gains, the long-awaited digital strategy announcement and confirmation of accelerated kiosk concept rollouts in 2012."
Reported by Jeanine Poggi in New York.
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