Piper Jaffray analyst Michael Olson today launched coverage of Coinstar (CSTR) with an Overweight rating and $38 price target. The parent of the Redbox video kiosk chain closed yesterday at $31.96.

Olson sees several trends working in the company’s favor:

• DVD rental kiosk market is gaining share from traditional retailers like Blockbuster.
• Internet delivery likely still 3-5 years from going mainstream.
• Consumers shifting to DVD rentals from purchases due to low fees from Redbox – $1-a-day.

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Blockbuster (BBI) shares rallied sharply Wednesday after the company announced a reduction in the letters of credit it maintains on behalf of Viacom (VIA), the company’s former parent, to $25 million from $75 million. The company said the change reflects a reduction in Viacom’s exposure to Blockbuster’s lease obligations.

The move is the latest in a series of steps the company is taking to get its financial house in order; last week it signed a deal to sell its 186-store, Ireland-based Xtra-Vision chain for up to $45 million.

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The battle for control of the DVD rental market is heating up, and taking a toll on all of the key players–retail store leader Blockbuster (BBI), DVD-by-mail player Netflix (NFLX) and $1-a-day kiosk operator Redbox, a unit of Coinstar (CSTR).

Last night, Blockbuster reported worse-than-expected results for the second quarter, and trimmed its full year guidance. The Street’s view is that the company is being hurt by a combination of its heavy debt load, slowing customer traffic and heightened competition from Redbox and other kiosk operators.

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Look at the outer shell–the parachute pants, the piano-key tie, the fake tuxedo T-shirt–and you might mistake me for a slave to fashion. Do not be deceived. Early adoption isn’t my thing. I much prefer late adoption, that moment when the trend-worshipping sheeple who have early-adopted drive the unsustainable way of life I so stubbornly cling to ever so close to the edge of obsolescence, that I’ve no choice but to follow. This explains why I bought cassette tapes until 1999, why I wouldn’t purchase a DVD player until Blockbuster (BBI) cashiered their VHS stock. Toothpaste? I use it now that it’s clear it’s here to stay.

So I’m not inflexible. But there is one promise I’ve made to myself. And that is that no matter how long I live, no matter how much pressure is exerted, no matter how socially isolated I become, I will never, ever join Facebook, the omnipresent online social-networking site that like so many things that have menaced our country (the Unabomber, Love Story, David Gergen) came to us from Harvard but has now worked its insidious hooks into every crevice of society.

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GameStop (GME) shares are getting clobbered today on news that Amazon.com (AMZN) is getting into the business of buying and selling used video games–and so is Toys ’R Us.

Credit Suisse analyst Gary Balter explained in a research note today that one reason he has maintained an Outperform rating on GME shares is that the company has dominated the used videogame business; he notes that used games generate 44 percent of the retailer’s gross profits, nearly twice the segment’s sales contribution to the company. Over the last several days, he reports, there have been two attacks on the company’s near monopoly in used games.

On Tuesday, Forbes reported that Toys ’R Us has a pilot program to test the sale of used games in some of its U.S. stores; Forbes noted that the program was first reported in the user forums of a Web site called cheapassgamer.com. Other retailers, including Best Buy (BBY) and Blockbuster (BBI), have previously experimented in the segment, but haven’t made much of a dent.

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There was an article about Blockbuster (BBI) on Venture Beat yesterday. The trading of the stock was halted after it dropped 77 percent because apparently the company is seeking to file Chapter 11 bankruptcy.

I worked for Blockbuster for a brief period of time after Bankers Trust (another defunct company–now part of Deutsche Bank) and before CRV. I was the President of BBI responsible for new media. I got there right before their second IPO as it spun out of Viacom (VIA) and left right before the now infamous Enron deal.

It was an excellent career move for me and despite my short time there I learned a lot, got to do a lot and almost became the kingpin of cable!

Here is the story of what almost happened.

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Blockbuster (BBI) shares this morning are selling off sharply on concerns about the company’s significant financing needs in the year ahead.

On the retailer’s post-earnings conference call last night, CFO Thomas Casey noted that Blockbuster has a $28 million term loan and a revolving credit facility coming due in August 2009. The company said it had been planning to put another bank credit facility in place early next year, but that “the current state of the banking and overall credit environment certainly muddies the outlook for that event.”

The company said it has an alternative plan to self-fund its business through 2009, which would “temporarily reduce our spending and maximize our cash flow.”

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On the heels of Netflix’s (NFLX) problems last week getting DVDs out the door to subscribers, Needham & Co. analyst Charlie Wolf initiated coverage this morning of Blockbuster (BBI) with a “Hold” rating. Wolf says that while the company is throwing lots of things at the wall to “see if it sticks,” it’s not clear the company will get the increase in same-store sales it needs to offset the drag on earnings from its 6,000 retail outlets. He did not offer a target price.

“Blockbuster’s major problem lies in its base of 6,000 stores,” writes Wolf. “The company’s challenge and opportunity is wrapped up in the relatively large fixed expenses entailed in operating its stores.” Blockbuster revenue barely covers the cost of running the stores, but even a modest tick up in same-store sales could “transform a basically break-even operation into a highly profitable one,” writes Wolf.

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On an early Saturday morning about three weeks ago, Barry M. Meyer pulled a sheet of paper from the fax machine in his home office, inhaled deeply and held it up to the light of a nearby window.

The number on the fax was eye-popping: $66 million, plus change.

Ka-ching. The opening-day box office receipts for the Batman film “The Dark Knight” had just set a record. And for myriad reasons–including the late Heath Ledger’s delicious turn as the Joker–the blockbuster is still filling theaters on a pace that may land it just behind “Titanic” on the list of all-time, top-grossing films.

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Blockbuster (BBI) after the close Tuesday announced the termination of its bid for Circuit City (CC). In a statement, Blockbuster CEO Jim Keyes said that “based on market conditions and the completion of our initial due diligence process, we have determined that it is not in the best interest of Blockbuster’s shareholders to proceed with an acquisition of Circuit City.”

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Blockbuster (BBI) shares are getting a lift today from Citigroup’s Tony Wible, who raised his price target on the stock to $8.50 from $8 and added the stock to the firm’s “Top Picks Live” list.

Wible writes that the company’s Q1 results reported yesterday provide evidence that the company’s turnaround is bearing fruit. He writes that that company has produced improvement in inventory management, raised prices for its Total Access service and cut costs. He also repeated his view that the company’s proposed acquisition of Circuit City (CC) would “provide cost synergies and help BBI become an open provider of technology and content.”

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Blockbuster (BBI) this morning gets mixed reviews for its Q1 financial results.

The bottom-line gets raves: Profits of 20 cents a share beat the Street by a nickel.

The top-line gets jeers: Revenue of $1.39 billion missed the consensus view of $1.44 billion.

Blockbuster said it had 2.9% same-store sales growth, with a 0.4% rise in same-store rental revenue and a 19.7% increase in same-store merchandise sales.

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There was good news for Apple and Comcast, but bad news for Blockbuster, woven into Time Warner’s conference call with investors today. Jeff Bewkes, Time Warner’s chief executive, said that the company’s Warner Brothers studio will now release movies for video-on-demand systems on the same day they are released as DVDs.

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