Outerwall, the parent of DVD-rental kiosk operator Redbox, said that its board has initiated a process to explore strategic  and financial alternatives aimed t boosting shareholder value.

The decision comes about a month after activist investor firm Engaged Capital urged the company to go private soon after amassing a 14.6% stake in Outerwall.

Outerwall said it has retained Morgan Stanley & Co. as its financial advisor, and Perkins Coie LLP as its legal advisor to assist in the process.

Update: Shares in Outerwall rose $3.61 (10.5%) to $38.00 each in after-hours trading Monday (as of 7:42 p.m. ET). 

The Outerwall board also announced it has declared an increase in the quarterly dividend payable to its shareholders to $0.60 per share, from $0.30 per share. That dividend is expected to be paid on June 21, 2016 to shareholders of record at the close of business on June 7, 2016. 

"The increase of our quarterly dividend to this sustainable level, and the decision to explore strategic and financial alternatives both clearly demonstrate that the Outerwall Board of Directors and management team are committed to acting in the best interests of the Company and all shareholders," said Erik E. Prusch, Outerwall's CEO, in a statement. "The Board and management team will evaluate all options thoughtfully and carefully with the support of our advisors. Throughout the review process, Outerwall will remain focused on executing on our operational plans, managing our businesses for profitability and cash flow, and continuing to align costs with revenue to create operational efficiencies, while returning significant capital to our investors."

The company also said there’s no assurance that the exploration will result in any particular action or transaction, and that it will not discuss or disclose developments in this area until the board has approved a definitive course of action or the process is otherwise concluded.

Last month, Outerwall posted Q4 revenues of $527.2 million, a decrease of 11.8%, while its Redbox unit pulled in $407 million, down from $490.7 million in the year-ago quarter, reflecting  a 24.3% decline in movie rentals year-on-year.  For Q4, Redbox generated 135.8 million rentals, down from 179.5 million, attributing the drop to an accelerated secular decline in the physical DVD market, high frequency renters returning more slowly to their normal rental patterns, and fewer titles available to rent in the period.

In 2013, Redbox and Verizon launched a service called Redbox Instant by Verizon that provided subscribers with access to a streaming library, plus the option to obtain credits toward DVD/Blu-ray discs that are available at Redbox kiosks. The J.V. shut down the service in October 2014 after it struggled to acquire subscribers.  

Outerwall, the company behind all of those Redbox DVD kiosks and a failed subscription OTT venture with Verizon Communications, announced Tuesday that CEO J. Scott Di Valerio has stepped down and resigned from the board.

Di Valerio (pictured), who was elevated to CEO from CTO of Outerall in April 2013 and is late of Lenovo and Microsoft, was replaced on an interim basis by Nora M. Denzel, a member of the Outerwall board since 2013. Denzel's also a former exec of Hewlett-Packard, Legato Systems and IBM.

Shares in Outerwall were down $7.45 (9.58%) to  $70.32 each in early trading Tuesday.

Outerwall, which has started a search for a permanent replacement, did not announce a reason for Di Valerio’s departure, but Outerwall chairman Nelson Chan noted in a statement that thanked him for contributions, noting that “the company is well-positioned due to its strong operating and financial foundation and a deep and talented team of employees.”

“Outerwall continues to capitalize on its market-leading brands to drive profitability and deliver value for shareholders, partners and customers. To accelerate the progress we are making, the Board believes that now is the right time for a leadership change, “ Chan added.

Among recent action, Redbox announced a pricing increase that took effect Dec. 2, 2014. The price for DVDs rose 30 cents to $1.50 per day, while Blu-ray discs increased 50 cents, to $2 per day. On Jan. 6, 2015, the price for video game rentals rose $1 to $3.

Redbox Instant by Verizon, the Netflix-like subscription multiscreen video service, shut down on Oct. 7, 2014, noting at the time that the offering “was not as successful as we hoped it would be.” The venture, launched in March 2013, offered a streaming library plus the option to obtain credits toward DVD/Blu-ray discs, and to buy and rent video titles electronically.

Looking ahead, the company said it expects consolidated revenue for the fourth quarter of 2014 to be in the range of $598 million to $602 million, with core diluted earnings per share from continuing operations to be $2.40 to $2.52. The company had already forecast earnings of $1.85 to $2.15 per share on revenues of $575 million to $605 million.

Outerwall said it will provide 2015 annual guidance on its fourth quarter earnings call, scheduled for February 5.

With one in three English Canadians subscribing to Netflix Canada – according to a Media Technology Monitor telephone survey of 2,002 Canadians – Rogers and Shaw have banded together on their own video streaming platform. Called ‘shomi’ (pronounced ‘show-me’) and due to a beta rollout in November 2014, the video streaming service will sell for $8.99/month; the same price as Netflix Canada’s charge to its new Canadian signups.

shomi, which is nearing its debut even as Comcast shifts its strategy for Streampix and Verizon and Outerwall shut-down their own multiscreen SVOD joint venture, will feature 11,000 hours of TV shows from previous seasons, such as Modern Family, Sons of Anarchy, Sleepy Hollow, Shameless, 2 Broke Girls, Vikings,New Girl, 24: Live Another Day, Chicago Fire, The Strain, and American Horror Story. The service will also offer 1,200 movies, and some first-window premieres. Custom picks will be provided to individual subscribers by programming experts as well as by "algorithmic technology." shomi’s content will be viewable on tablet, mobile, online, Xbox 360 and set-top boxes.

The only catch: shomi will only be available to Rogers and Shaw subscribers; at least initially. As a result, the service will not target cord-cutters who have flocked to Netflix Canada; only hopefully stem the tide of cable subs considering making the move to Netflix.

“At beta launch in November, Rogers and Shaw customers will be able to subscribe to the service in the same way that they currently do to all of the services they receive from these companies – and use the same username and password to access shomi as they currently use to access their online services with Rogers and Shaw,” said Marc Dinsdale, shomi’s GM and senior director. “Subscribers will see the service added to their monthly statement in the same way they currently see their cable, Internet, wireless or other services.”

This gap in shomi’s marketing strategy is glossed over during the service’s public unveiling in Toronto and Calgary on August 26. "We've taken the time to talk with Canadians to find out what they want and to create an unbelievable user experience," said Keith Pelley, President of Rogers Media. "They told us loud and clear – they want all the past seasons of the most popular, current TV shows and they want it to be easy.”

"We keenly understand the media landscape is rapidly changing and that viewers are looking for greater flexibility when it comes to what they watch and how they watch it," added Barbara Williams, Shaw Media’s SVP of content. "shomi is our first step into the new world of content streaming and we're so pleased to be able to bring this made in Canada service to the market."

One of shomi’s biggest selling features is its extremely easy-to-operate user interface. It was created by Ottawa software company You.i Labs, maker of the Kobo Arc tablet interface. You.i’s interactive interface uses "tap-and-hold" submenus, which reduces the number of steps required to select movies. Users can also watch content in a "player window while searching through shomi’s library.

“A great amount of attention and effort was placed on creating a user experience that is more personal and human to our members,” said Dinsdale. “This is reflected in the brand, in the tone of voice throughout the experience, in the content that we have specifically selected for our members, in the user experience that we have created across all devices, and in the selection of technology platforms – all intended to make shomi a simple, understandable and, above all else, pleasurable experience for our members.”

It is impossible to predict just how well shomi will perform against Netflix Canada, and whether Canada two largest cable companies will eventually open up their video streaming service to all Canadians whether they subscribe to cable or not. Nevertheless, shomi’s Marc Dinsdale is optimistic that the new service will catch on. “While we are not in a position to share our membership goals at this time, we have planned for a steady growth in members, content and devices through which shomi will be available, and similarly a growth in the underlying technology platforms and infrastructure to support this growth,” he said.

--Multichannel News technology editor Jeff Baumgartner contributed to this report

Redbox Instant by Verizon, the Netflix-like subscription multiscreen video service, is shutting down on Tuesday, Oct. 7, the joint venture confirmed in this Web posting.

GigaOm first reported about the coming shut-down on Saturday, noting that subscribers were also informed via email earlier in the day. GigaOm reported earlier that Redbox Instant by Verizon had halted new sign-ups in recent months because the service’s monitoring systems had “detected that criminals were misusing our new customer registration process to validate credit card numbers illegally obtained from some other sources.”

The full posting about the coming shut-down reads as follows:

IMPORTANT SERVICE SHUTDOWN NOTICE

Thank you for being a part of Redbox Instant by Verizon. Please be aware that the service will be shut down on Tuesday, October 7, 2014, at 11:59 p.m. Pacific Time.

Information on applicable refunds will be emailed to current customers and posted here on October 10. In the meantime, you may continue to stream movies and use your Redbox kiosk credits until Tuesday, October 7 at 11:59 p.m. Pacific Time.

We apologize for any inconvenience and we thank you for the opportunity to entertain you.

Sincerely,
The Redbox Instant by Verizon Team

The Verizon-Outerwall J.V. launched the service in March 2013, offering a service that was viewed as a potential rival to Netflix, a service that now counts more than 50 million subscribers worldwide. The Redbox Instant by Verizon service provides subscribers with access to a streaming library, plus the option to obtain credits toward DVD/Blu-ray discs that are available at Redbox kiosks. Customers can also rent or buy titles electronically from a separate library, with rentals starting at $3 for 48 hours, and purchases starting at $9.

Redbox Instant by Verizon has not disclosed subscriber figures, but the totals clearly weren’t nearly enough.

“The service is shutting down because it was not as successful as we hoped it would be. We apologize for any inconvenience and we thank you for giving us the opportunity to entertain you,” reads the FAQ about the decision to shut down the service.

The FAQ adds that the service will be providing a full month’s subscription fee refund to customers who paid for, but only received a partial month of service, and that refunds will be automatically applied to payment card accounts no later than October 24. Customers must also use disc rental credits included with their subscriptions by Tuesday, Oct. 7.

Redbox Instant by Verizon said it is “exploring options” for customers who purchased electronic versions of movies that are currently being stored in digital lockers.

Redbox Instant by Verizon has developed apps for a range of platforms, including PC browsers, iOS and Android-powered smartphones and tablets, the Xbox One and Xbox 360, PS3 and PS4, Roku, Chromecast, Fan TV, Samsung smart TVs and Blu-ray players, LG smart TVs, Kindle Fire  tablets, and Windows Phone 8.

A statement from a Redbox Instant by Verizon spokesman about the decision issued Saturday largely echoed the public posting: “The joint management of Redbox Instant by Verizon has elected to cease operation of the service effective Tuesday, October 7, 2014.  The joint venture partners made this decision after careful consideration  The service had not been as successful as either partner hoped it would be.  We apologize for any inconvenience this may cause our customers.”

It was not immediately known how many employees tied to the service would be affected by the decision. “While Human Resources matters are private, I can tell you that the Redbox Instant by Verizon team is made up of talented individuals who made great contributions to the service,” the spokesman added.

The coming shutdown of Redbox Instant by Verizon enters view as Comcast shifts the distribution and sales strategy for its own SVOD offering, Streampix. Comcast confirmed in late September that it had halted sales of Streampix to broadband-only customers and that is was decommissioning its Streampix apps and Web site. However, the Streampix service will continue to be sold as an a la carte option (for $4.99 per month), or given away as a perk, to customers who take certain bundled service packages.

Meanwhile, Canadian operators Rogers Communications and Shaw Communications, are set to launch their multiscreen streaming service, “shomi” in beta form later this month.