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Verizon to set up streaming service with Redbox
Verizon and Coinstar Inc., Redbox’s parent company, said Monday that the service will be national and available to non-Verizon customers as well. It adds another dimension to Verizon’s quest to become a force in home entertainment, and it looks set to compete to some extent with the cable-TV services it already sells.
Unlike competing services from Amazon.com Inc. and Wal-Mart Stores Inc., the new service will combine Internet delivery of movies with DVDs, the way Netflix does. Dish Network Corp. also offers a similar bundle through its Blockbuster subsidiary.
Specific details and pricing of the new plan weren’t announced.
Late last year, the companies were shopping around a $6-per-month offering that would give subscribers one DVD rental from Redbox per month as well as unlimited streaming of a certain selection of movies, according to a person briefed on the plan then. The person was not authorized to speak publicly and spoke on condition of anonymity.
It’s not known whether the plan has changed since then, though the price is likely to be less than the $16-a-month minimum that Netflix subscribers have to pay for a combined DVD-by-mail and streaming plan.
Although consumers would pay less, Redbox’s inventory is limited to what’s in its kiosks, compared with Netflix’s library of more than 100,000 discs, including more obscure fare. Redbox customers will also have to go in person to pick up a disc, which saves the company mailing costs.
Getting an extensive library of streaming content to rival Netflix’s 20,000-plus titles will be expensive. The rising cost for streaming rights is the main reason that Netflix raised its U.S. prices by as much as 60 percent last year in a move that triggered a customer backlash. At the end of 2011, Netflix had video licensing commitments totaling $3.9 billion worldwide over the next several years.
Verizon will handle the streaming negotiations, Coinstar CEO Paul Davis told analysts in a conference call held late Monday to discuss the company’s fourth-quarter earnings. He declined to answer questions seeking more details about how the joint subscription service might work, citing a desire to keep things under wraps for competitive reasons. The streaming service won’t be available until the final half of this year.
Redbox, whose DVD rental kiosks are located in more than 29,000 stores, has been looking to expand into online streaming for more than a year. Its business so far has revolved around renting DVDs for as little as $1.20 per day. Along the way, Redbox says it has accumulated about 36 million email addresses from DVD and video-game renters _ information that could be used to promote the new streaming service.
Verizon has its own cable-TV service, called FiOS, in some areas. Its Verizon Wireless subsidiary has also signed a deal to sell service from Comcast Corp. and other cable TV companies in its stores. The cable-TV experience has helped Verizon establish business relationships with Hollywood studios and other content producers, something that could be an advantage in the negotiations for streaming rights.
With the Redbox venture, Verizon is breaking ranks with the cable and satellite industry, which makes its own video streaming services available only to people who also subscribe to its traditional TV feeds. They don’t want households switching to Internet-only services, which are cheaper. Netflix Inc. charges $8 per month for its streaming-only plan, for instance, while the average monthly cable bill is more than $70.
“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.
Verizon’s own FiOS business is relatively small, with 4.2 million subscribers, making it the seventh-largest provider of TV signals to U.S. homes. Meanwhile, its landline phone business is shrinking, so it needs other avenues for growth. Its wireless arm is growing, but it owns only 55 percent of that venture. (Vodafone Group PLC of Britain owns the rest.)
Netflix, which is based in Los Gatos, Calif., ended last year with 24.4 million U.S. subscribers. About 8.4 million of those customers pay for Internet streaming and Netflix’s DVD-by-mail rental service.
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