Verizon to set up streaming service with Redbox
Verizon and Coinstar Inc. said Monday its service will be national and available to non-Verizon customers as well, placing even more pressure on Netflix. Verizon currently own its own cable TV service, FiOS, in some locations and its wireless subsidiary also signed a deal to sell service from Comcast Corp. and other cable TV companies.
“We’ve made a conscious decision to innovate and get involved with this market because it’s legitimate and growing, and we think the partnership with Redbox gives us huge upside,” said Bob Mudge, president of Verizon’s consumer business.
The company’s FiOS business is fairly small with about 4.2 million subscribers, making it the seventh largest provider of TV signals to U.S. homes. With Verizon’s landline business shrinking the company is seeking other avenues of growth. To build the service, Verizon will take advantage of the relationships with Hollywood studios and other content producers it has built through FiOS, Mudge said.
Verizon and Coinstar didn’t reveal prices or other details of their service. It’s intended to give subscribers access to DVD and Blu-ray discs as well as streaming movies starting in the second half of the year, they said. Subscribers might visit the site to find that the movie they want isn’t available for streaming, but is available at a Redbox kiosk nearby, said Paul Davis, the CEO of Coinstar.
New York-based Verizon Communications Inc. will own 65 percent of the unnamed venture, with Bellevue, Wash.,-based Coinstar Inc. owning the rest. Redbox is contributing an initial $14 million to the venture, according to a regulatory filing. It did not say how much Verizon would contribute.
In morning trading Monday, Coinstar’s stock fell 6 cents to $49.60 after initially jumping 6.6 percent on the news. Verizon shares rose 6 cents to $37.90. Netflix shares fell $3.59, or 2.8 percent, to $122.84.
Netflix already has a couple of powerful competitors with video streaming services. Amazon.com Inc. provides a library of movies and TV shows to subscribers to its Amazon Prime shipping services. Wal-Mart Stores Inc., the world’s biggest retailer, has a streaming service called Vudu.
Neither of these competitors combines Internet delivery of movies with DVDs, like Netflix does. However, Netflix started charging separately for its DVDs-by-mail and online streaming services last year, saying DVDs are on their way out and Internet delivery is its focus.
Netflix alienated customers even more when it said it would split the two services completely, forcing customers to deal with two movie queues. It backed off that plan after an outcry, demonstrating that customers found value in the combination of Internet movies and discs from one company.
Redbox appears to have benefited from Netflix’s troubles, picking up some of the customers who have defected from its DVD service. It now claims to be the biggest DVD rental service in the country, thanks to its more than 28,000 kiosks in drugstores and supermarkets.