Bellevue-Based Coinstar (and Its Subsidiary Redbox) Set to Gain From Netflix's Loss

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Yesterday, Netflix shocked the world by severing itself in two, creating a new entity named Qwikster to handle its mail-order DVD business. While the move makes a certain sense from the perspective of a company intent on staying as far ahead of the competition as possible, reaction has been overwhelmingly negative. So negative, in fact, that some Netflix competitors have been publicly licking their chops. We wondered whether Bellevue-based Coinstar, owner of the popular, downmarket DVD vending-machine outfit redbox, is among them.

Turns out Coinstar is playing it cool.

"We don't talk a lot about our competitors," says Coinstar spokeswoman Marci Maule. "We welcome all new customers from whatever source."

Maule did add that the company is "implementing targeted online advertising and an online welcome kit with tips and freebies" in an attempt to lure disaffected Netflix subscribers, but wasn't able to immediately provide examples of these.

Redbox, it's worth noting, has been doing well for itself. According to its most recent earnings report, the company's market share in rental DVD units is downright enviable.

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Coinstar, Inc. 2011 Q2 Earnings Report

That said, redbox has a long way to go if it has ambitions of challenging the dominance of Netflix and Qwikster, as Dan Gallagher points out.

Total revenues for Netflix' U.S.-based business in the first six months of this year was about $789 million - more than six times the top line for Redbox in the same period. And physical realities tend to limit the selection in Redbox kiosks to new releases, while Netflix famously draws a large portion of its DVD revenue from older library titles.

Leaving aside the potential to profit from Netflix's pain, redbox is doing quite well for itself. Parent company Coinstar, which built its empire around the fact that many people are too lazy to sort their loose change--but which now gets 75 percent of its money from redbox DVD rentals--was ranked last week by Fortune magazine as 22nd on its list of the nation's 100 fastest-growing companies.

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CNNMoney

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