Verizon, Redbox To Join Forces as Newest Netflix Rival [UPDATE]

Posted by · February 6, 2012 12:09 pm

In a joint announcement Monday, Verizon Communications and Redbox took aim at online streaming frontrunner Netflix by proclaiming that the duo would be working together to offer a new online streaming and video rental service. Said to be scheduled for the second half of 2012, Verizon and Coinstar—the company that owns Redbox—said that although Verizon is planning to market it rather heavily to network customers, the new service will not be exclusively available to Verizon customers.

Speaking on behalf of Verizon, Bob Mudge, president of Verizon consumer and mass business markets, had the following to say about the joint endeavor:

Together, we are erasing old technology boundaries, freeing people to spontaneously enjoy the entertainment they want, whenever they choose, using the devices and media they prefer, at home or away.

The joint venture will combine the accessibility and value of Redbox with Verizon’s vision for a borderless lifestyle—where consumers easily accomplish what they want or need to do, on their terms, through the power of the network.

The joint venture will be 65-percent owned by Verizon, leaving the remaining 35 percent to Coinstar. This comes according to a regulatory filing by the Redbox parent company.

By combining their core strengths, Verizon and Redbox will target Netflix by providing video streaming to user devices while offering rentals from Redbox’s 35,000-plus kiosks—all for one monthly fee. In doing so, the duo believes that it will be able to offer a superior selection of movies and shows.

“Consumers who instantly want a new release can go to a kiosk and get it,” commented Coinstar CEO Paul Davis. “For titles that are a bit older, there will be streaming capability.”

With Redbox kiosks a maximum five-minute drive away from more than 70 percent of American consumers, the goal is to offer newer titles at the kiosks while making older titles available through the streaming service. Despite this impressive proposal, however, the number of titles available in Redbox kiosks remains a mere fraction of the new titles available for rent in Netflix’s online library—leaving consumers with a tough choice between less selection at a greater convenience or more selection at a two-plus day delay.

While new title selection might not be its strongest suit, the new service, which is yet to be named, will have something that Netflix doesn’t—148 million warm leads. That is, while Netflix has recruited an impressive 25 million subscribers over the years, Verizon and Redbox boast nearly six times as many customers that will make ideal leads for the new service as soon as it debuts later this year.

Although this won’t be the first challenge to Netflix’s dominance in online video streaming (let’s not forget Amazon Prime, DISH Network’s Blockbuster Movie Pass, Hulu Plus and others), the combined strengths of a Verizon-Redbox duo may arguably be the strongest Netflix opponent yet.

UPDATE: Redbox Acquires Blockbuster Express Kiosks

The same day that it announced its plans to hook up with Verizon to offer a new movie service later this year, Redbox also announced that it also plans to purchase the company NCR, the company that runs the Blockbuster Express kiosks. Such an acquisition will make the popular movie rental kiosks even more ubiquitous than they already are.

The deal, which is said to be in the $100 million range, will hand over all inventory, including discs and kiosks, as well as the contracts for the locations where the kiosks are currently located. According to a report from TheNextWeb, a separate $25 million purchase will cover maintenance and software services for the kiosks.

Discussing the deal, NCR executive vice president and chief technology officer John Bruno said that the agreement will allow his company to be “better positioned” with regard to “expanding our business in our targeted industries.” Furthermore, Bruno called the deal an “opportunity” that will enable NCR to establish a “long-term strategic relationship” with the Redbox parent company, Coinstar.

Meanwhile, defending the company’s continued investment in the physical media rental sector, Redbox CFO J. Scott Di Valerio believes that such media still has at least a decade to go before any kind of mortal downturn.

“Steaming is great—it’s really exciting,” he began, “but we’re also looking at how we innovate in this automated retail space.”

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