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CEO of Coinstar on automating business

U.S. coins are displayed at the Money Museum in the Federal Reserve Bank of Chicago June 22, 2011 in Chicago, Ill.

Competitors like RedBox have made it hard for Blockbuster to survive.

Jeremy Hobson: If you think about things we're not going to be using in the years ahead, small change like pennies might be one of them; so might DVD's. But if you look at the success of the company Coinstar -- which owns the DVD rental kiosk company Redbox -- you might come to a different conclusion. Both businesses use machines to sell their products rather than human employees.

The CEO of Coinstar, Paul Davis, joins me now from Los Angeles.

Paul Davis: Good morning Jeremy, how are you?

Hobson: Doing well. So you had 22 percent revenue growth in the latest quarter, 26 percent of that from Redbox. So how is something like Redbox able to do so well when Blockbuster is out of business? 

Davis: Well, I think in many ways Redbox has filled sort of, an unmet consumer need. We have 38,000 kiosk across the U.S. So, we’re a five minute drive of over 75 percent of the U.S. population.

Hobson: But isn’t, like, streaming on Netflix or going on Hulu or something like that, easier even than taking a five minute drive to a Redbox kiosk?

Davis: Well, in many ways the convenience of having our locations where consumers go everyday continues to win. We’re not sticking our head in the sand we believe that getting into the same space as Netflix makes a lot of sense. That’s the reason we announced a joint venture, earlier this year, with Verizon and we think we’re well positioned to have the best of both digital as well as physical product in a winning solution.

Hobson: Where do you see yourself expanding to going forward in the next couple of years?

Davis: Well, we’re really excited about the seeds that we’ve been working on. We recently announced a partnership with Seattle’s Best, in coffee. We have plans for thousands of those machines in supermarkets, drug stores, mass merchants, club accounts. We also have a concept that we’re calling Orango, which is focused on refurbished used electronics at a great value.

Hobson: So how many human employees do you have?

Davis: We’re just around 3,000.

Hobson: So, that doesn’t seem very high considering you that you’ve got 60,000 locations for Coinstar, right?

Davis: Yeah, the business model that we’ve developed over the last 20 years is highly efficient and effective. So, it doesn’t take a lot of people to keep the equipment up and running. They’re all remotely connected so we have access to those. With our Redbox business as an example, we can take care of virtually 80 percent of the service needs remotely. So it’s a very very effective business model.

Hobson: It may well be, but it’s also kind of depressing for the future of the U.S. labor market.  Is the future of U.S. business just machines and not people?

Davis: Well, I don’t think it’s going to go that path. We believe that automated retail is a terrific intersection of both the brick and mortar stores as well as e-commerce. Consumers are very comfortable with technology; they like to control their own destiny because they don’t have a lot of time on their hands.

Hobson: We recently had one of our Marketplace correspondents travel from coast to coast without ever having interacting with a single human being. He just checked into hotels using the kiosks, went to the supermarkets where you could buy the food on the machines. Is that where we’re headed?

Davis: I don’t think we’ll ever get to that point. I think consumers will always want to have interactions with human beings. So we try to provide convenient solutions for consumers that are sort of where they go everyday at a great value and serving consumers unmet needs. So we think all these channels can coexist in a very healthy way.

Hobson: But you’ll side with the human beings if we ever get into a war with the computers?

Davis: Probably will.

Hobson: Paul Davis, CEO of Coinstar, thanks so much for coming in.

Davis: Thanks Jeremy.

About the author

Jeremy Hobson is host of Marketplace Morning Report, where he looks at business news from a global perspective to prepare listeners for the day ahead.

Competitors like RedBox have made it hard for Blockbuster to survive.

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