Verizon communications has unveiled, in a news report, a partnership plan with Redbox to provide video streaming service under the kiosk-based movie rental brand. Redbox is on a move and Coinstar, its parent company’s stock shot up nearly 16 percent with fourth quarter earnings more than double the profits.
Verizon with Redbox to compete with Netfix on video streaming
The venture will directly compete with Netflix, which now has more than 20 million subscribers, by combining the Redbox DVD rental kiosk business with an Internet video offering from Verizon, including mobile offerings.
Business magazines expect the video service to start streaming in the second half of 2012 and will raise Redbox's competition with video service Netflix, among others. Coinstar said Redbox would pay $100 million to buy more than 10,000 kiosks from rival NCR Corp.
Redbox has become popular at grocery stores, airports or other convenient locations, where consumers look forward to rent movies cheaply on the go. But streaming is increasingly becoming the go-to choice for movie consumers at home on set-top devices such as the Roku, Apple TV and connected Blu-ray DVD players.
Will Verizon – Redbox’s joint venture succeed?
Whether the Verizon – Redbox joint venture succeeds largely would solely depend on how much the service costs and what type of content it offers. Pacific Crest analyst Steve Clement said in a statement to an industrial magazine, “It is too soon to judge whether the venture will be a success. We don't know what kind of content they'll have available, what they'll pay for that content and what they'll charge for it. There's way more questions than answers at this point.”
Verizon’s CEO Paul Davis called the streaming deal ‘a top priority’ and hopes that the service would be available by November. The NCR kiosk deal is subject to regulatory approval, but Redbox hopes to close it in the third quarter, during which it will enter into a services agreement with NCR.
Most of the NCR kiosks, purchased by Dish Networks last year, are now branded as Blockbuster Video.
However, investors in Verizon and Coinstar were unimpressed on little detail offered by Verizon and Redbox about the service.
Netflix shares ended up 2.2 percent, reversing a decline that came directly after the news. Netflix's has currently priced the streaming at $7.99 for either streaming only or a single DVD by mail. The package prices for both, streaming and DVD rental starts at $15.98.
Verizon – Redbox’s new video service's price will start from around $6 a month for movie streaming and one DVD rental at a time from the Redbox kiosks. Apparently, Verizon is trying to make up for lost ground as a telecom giant that has controlled distribution channels but allowed start-ups to muscle in on streaming.