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Coinstar and McDonald's to Deliver DVD Rental KiosksCoinstar To Enter High Growth DVD Market (November 18, 2005)
Coinstar, Inc. today announced an agreement with McDonald's Ventures, LLC, a wholly-owned subsidiary of McDonald's Corporation, to invest in Redbox Automated Retail, LLC. Coinstar will invest $20 million in cash and will own a 47.3 percent share in Redbox. Redbox is the leading renter of DVDs through self-service kiosks with about 800 locations in the United States, including McDonald's restaurants and supermarket locations. The Redbox business has been in operation since 2002 and currently is a majority-owned subsidiary of McDonald's Ventures, LLC.
Redbox has more than three years of planning, customer testing, refinement and in-market operations experience. Redbox is capitalizing on the growth of the home video market that is expected to reach $42 billion by 2014 and the DVD self-service kiosk market segment with growth potential in excess of $3 billion by 2009.
Current U.S. locations where the Redbox service is available have delivered strong results with over three million DVDs rented over the last five months. Consumers have enthusiastically embraced the $1 per night price point, convenient return options and easy self-service operation of the kiosk.
"We are very excited about teaming up with McDonald's Ventures on this business," said Peter Rowan, vice president of new business innovation at Coinstar, Inc. "Redbox is a proven product that has already gained consumer and retailer acceptance in the United States. Further, Redbox is a great addition to our 4th Wall(TM) product portfolio that helps retailers increase traffic and profit at the front of their stores -- with no labor or cost requirements."
"Customers tell us they like having movies on our menu," said Chris Catalano, chief investment officer of McDonald's Ventures, LLC. "Partnering with Coinstar is an exciting next step that will enable the expansion of Redbox to more locations. Coinstar has had tremendous success building a complex network of self service kiosks. They understand the complexities and nuances of this business, and have excelled in delivering high profit per square foot services to retail customers."
Today, Redbox is available in select McDonald's restaurants and supermarkets across the country (a complete list of locations is available at www.redbox.com). Coinstar, Inc. will now serve as the exclusive sales agent for Redbox in the U.S. for supermarkets, mass merchandisers, drug stores and wholesale clubs.
Coinstar expects to invest $20 million in cash at the close of the transaction and another $12 million after one year if certain growth objectives are achieved. After the second year, Coinstar has a 12-month option to obtain additional shares acquiring a majority voting interest in the business. This transaction is expected to close in the next 30 days. Closing the transaction is contingent upon certain customary conditions including securing certain contractual consents.
Redbox Automated Retail, LLC, will continue to operate independently out of its headquarters in Oakbrook Terrace, Ill. The company will be managed by a four-person board of directors in which two positions will be appointed by Coinstar, Inc. and two will be appointed by McDonald's Ventures, LLC.
Coinstar, Inc. announced that a conference call to discuss the proposed investment in Redbox Automated Retail, LLC will be broadcast live over the Internet today, Thursday, November 17, 2005, at 4:30 p.m. Eastern Time. The Webcast will be hosted at the "About Us - Investor Relations" section of Coinstar's Web site at www.coinstar.com.
Related Keywords:Coinstar, McDonalds, McDonalds Corporation, Redbox Automated Retail, DVD kiosks