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4 Reasons Coinstar's Bet on EcoATM Will Be as Fruitful as Its Redbox Venture

Coinstar (CSTR) is anxious to find the next great automated kiosk idea. There have been stabs at coffee kiosks with Starbucks (SBUX)) and an interest in cosmetics. But it's Coinstar's recent investment in ewaste startup EcoATM -- kiosks that allow consumers to recycle or resell their mobile phones and MP3 players -- that holds the most commercial promise.

Faced with a stagnant coin-counting business, Coinstar smartly pinned its future five years ago on DVD rental company Redbox. Coinstar's DVD services revenue has grown considerable and accounted for 67 percent of its $1.1 billion annual revenues last year. And while Redbox sales are expected to grow for several more years, Coinstar isn't wasting any time trying to find and test the next new thing.

Last year Coinstar launched its Next Great Idea challenge, a contest aimed at finding exactly what the name implies. It's first winner? EcoATM. Since then, Coinstar and San Diego-based EcoATM have have become increasingly intertwined. EcoStar's investors include Coinstar founding CEO Jens Molbak, who was recently appointed to the ewaste recycling company's board of directors. Now Coinstar has invested an undisclosed amount in EcoATM as well.

Here's why it's a worthy bet:

  1. Supply: Some 100 million cell phones are tossed into drawers and landfills each year in the United States, according to the National Resources Defense Council. And that supply is only going to get bigger.
  2. Financial incentive: Unlike its coin-counting business, which takes 9.8 percent of the user's money, ecoATM doesn't take -- it gives or at least recycles it for you. A user inserts their device into the kiosk, where it is automatically scanned and a value is calculated. The consumer can opt for cash or a gift card -- presumably to be used in the stores where the ecoATMs will eventually be located -- right then and there. Or, they can donate the funds to charity. The device is then either sold on the secondary market, once all the data has been properly removed, or its melted down for the metal.
  3. Convenience: These days if you want to recycle a cell phone you have few options, all of which require effort on the consumer end. And we hate to make an effort. In most cases, the consumer has to mail the mobile device to the manufacturer or an ewaste recycling spot. That doesn't sound like a big deal, but it's just one more chore that gets put off indefinitely.
  4. A network is already in place: Coinstar's kiosks are already in grocery stores like Albertson's, King Soopers and Kroger's, fast-food giant McDonald's (MCD), Walgreens (WAG), CVS drug stores and Wal-Mart (WMT). Redbox has more than 22,000 kiosks on its own. Which means Coinstar already has an established relationship and network to roll out ecoATM on a large scale.
Photo from ecoATM
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