Weakness at acquired kiosks hits Redbox parent

Redbox parent Coinstar profits dropped last quarter, and the stock got hammered as Wall Street frets over weakness at acquired kiosks, fewer DVDs released in January and too many moving parts in the video landscape these days.

Net income dipped 27% $22 million from $31 million. Revenue rose 8.4% to $564 million driven by Redbox, where revenue grew 9.6% to $488 million on new DVD kiosk installations. But the pace of new installs is slowing as Redbox concentrates on “optimizing” its network versus further expansion, execs said on a conference call Thursday.

Asked about the longer-term viability of the DVDs dispensed by Redbox’s 43,700 kiosks, CEO Paul Davis said, “We have lot of confidence that the physical business continues to be a thriving business.”

Davis is retiring. CFO Scott Di Valerio will become CEO in March.

Results came out after the market closed, and shares fell nearly 8% in after-hours trading to $48.

To cover its bases, streaming service Redbox Instant by Verizon, currently in beta testing, will launch over the next few months. Execs said Coinstar will invest $14 million in the service this quarter and that it should be able to generate cash flow moving into the back half of the year. It will be accounted for as a startup, not a core business, for 2013.

Redbox is experimenting with kiosks selling tickets to local events.

Bellevue, Wash.-based Coinstar’s original business was its 20,300 self-service coin-counting kiosks.

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