Coinstar, Inc. (CSTR) Is No Netflix, Inc. (NFLX) Killer

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Editor’s note: This article was originally published last week

Netflix, Inc. (NASDAQ:NFLX) shares closed 3% lower yesterday, bucking the trend of gains by consumer-facing bellwethers. Marketwatch suggests that the decline was the result of Roku announcing that its popular set-top streaming device would work with Redbox Instant by Verizon (NYSE:VZ), the video service rolled out earlier this year by Verizon and Redbox parent Coinstar, Inc. (NASDAQ:CSTR).

Coinstar, Inc. (NASDAQ:CSTR)

Coinstar stock moved marginally higher on the day, so there’s no reason to argue the thesis.

However, have any of the investors that bid Netflix, Inc. (NASDAQ:NFLX) stock lower — and Coinstar, Inc. (NASDAQ:CSTR) stock higher — actually seen the flimsy catalog of titles currently available on Redbox Instant?

Having a presence on Roku isn’t going to get folks excited about paying the same $8 a month that they pay Netflix for a sliver of the content on Redbox Instant.

Roku signs up all free agents. A Roku box provides its millions of owners with streaming access to Netflix, Inc. (NASDAQ:NFLX), Prime Instant, Hulu, and HBO Go — but it also provides access to Crackle, PBS Kids, and Vudu.

How many subscribers do you think Netflix has lost because Roku owners can stream Vudu or Crackle? Let me answer this for you by pointing out that Netflix, Inc. (NASDAQ:NFLX) had 26 million global streaming subscribers a year ago and it has more than 36 million members today.

More importantly, the one thing that differentiates Redbox Instant from rival offerings — four nightly DVD rentals a month from the more than 43,000 Redbox kiosks that dot the country’s strip malls — is probably lost on Roku owners.

Folks don’t buy a Roku box because they’re happy with DVDs. Folks buy Roku media players because they want entertainment beamed into their homes. They don’t want to drive out to the grocery store or pharmacy to get a 90-minute flick, only to race back to return it the next day. Yes, Redbox Instant offers digital purchases, but so does Vudu, Prime Instant, and others.

Consumers buy a Roku because they want a lot of entertainment on their terms, and there is no platform better than Netflix, Inc. (NASDAQ:NFLX) at doing exactly that.

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