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Is Netflix Killing Redbox?

Is Netflix Killing Redbox? - Coinstar (CSTR), the parent company of the $1 DVD rental kiosk service, plunged 25% Friday morning after reporting that its fourth quarter sales and profits were far below forecasts.

But shares of its top rival, Netflix (NFLX), dipped a bit as well.

That's telling. It's probably a mistake to view Coinstar's results as a sign that Netflix is hammering nails in Redbox's coffin.

It doesn't appear that consumers were suddenly less interested in watching DVDs during the holidays. In fact, Coinstar CEO Paul Davis said in a statement Thursday that visits to Redbox kiosks in the fourth quarter "remained strong." It's just that consumers rented fewer movies -- meaning they stopped by but didn't spot as many titles they wanted to take home.

Revenue from Redbox rose 38% in the fourth quarter, and same-store sales (an important metric for retailers) were up 12.5%, Coinstar said. That's impressive growth. It just fell short of analysts' even higher expectations.

Is Netflix Killing Redbox?

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