Article

Outerwall gets back to basics

The company wrapped up 2013 a few kiosk ventures short, shifting focus to the ecoATM and its core businesses.

February 7, 2014 by Natalie Gagliordi — Editor of KioskMarketplace.com, Networld Media Group

Outerwall reported its Q4 2014 earnings on Thursday, marking the company's first financial briefing since axing Rubi, Crisp Market and Star Studio kiosks from its New Ventures portfolio.

Outerwall's CFO Galen Smith said during the earnings call that the decision to shore up the company's focus resulted in a revenue increase of 5.4 percent year-over-year, or approximately $594 million for the quarter.

With the fledgling kiosk projects out of the way, Outerwall is focusing on its core businesses, Redbox and Coinstar, as well as ramping up rollouts of ecoATM.

"We're pleased with the progress we're making with ecoATM as we talked about ... and we began testing them out in a pilot fashion in the mass merchant channel and those pilots are going quite well and we're continuing to expand those pilots out in a number of kiosks in the marketplace," said Outerwall's CEO Scott Di Valerio, during the earnings call. "The number of kiosks that we put this year for ecoATM was in line what we had expected when we acquired the business and they're right on track from that perspective."

Smith noted that Outerwall is continuing to test channels that could lead to profitable placements of the ecoATM, and that they are evaluating the decision to expand the kiosk internationally.

"We believe that this is a good international play," he said, but that they will "move international at a lower saturation point than what we have with our other kiosk products or automated retail products."

It was revealed during the Q&A that the ecoATM hit a slight speed bump when users began recycling iPhones without turning off the Find My iPhone feature. In those cases, the phone becomes what they call a brick, meaning it is not usable by any other person and ends up getting sold for parts — a significant drop in profitability for business. Di Valerio said that in order to fix the issue, a few processes on the kiosks were tweaked.

"We added a step, a few steps, into the user interface into the ecoATM which walks our consumers through being able to turn and go back up into iCloud and turn off the Find My Phone feature, which allowed us to being able to get more phones in that were not bricks," he said.

Redbox

Wrapping up its Redbox rollout in Canada, Di Valerio said the company finished 2013 with 1,100 kiosks on the ground, and expected that to increase by between 250 to 450 kiosks as they enter the New Year. The rollouts will continue to focus on key geographies such as Vancouver and Toronto, he said.

"We think concentrating the installs will allows us to get the network effect of the rent return anywhere, similar to what we have in the U.S.," Di Valerio said. "We're targeting to get them in the ground earlier than later through the year, and then be able to build the rest of the kiosks as we're able to."

Redbox net revenue per rental increased from $2.46 in Q3 to $2.58 in Q4, with the kiosks also seeing a growth in Blu-ray, which represented 16.3 percent of total Redbox revenue.

Read more about DVD kiosks.