Verizon to set up streaming service with Redbox

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Verizon and Coinstar said the service is intended to give subscribers access to DVD and Blu-ray discs as well as streaming movies starting in the second half of the year. 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, Coinstar’s Davis said.

To get people to try the service, Verizon and Redbox look set to undercut Netflix’s cheapest DVD and streaming plan of $16 per month, which is 60 percent higher than its $10 monthly rate before prices went up in September.

New York-based Verizon Communications will own 65 percent of the unnamed venture, with Bellevue, Wash.,-based Coinstar 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. The filing indicated the two companies may be called upon to contribute a combined $450 million to the venture _ another indication that it will have to pay steep licensing fees.

Coinstar’s stock gained 91 cents, or 1.8 percent, to close Monday at $50.56. The stock then soared more than 16 percent in extended trading late Monday after the company reported fourth-quarter results that indicated Redbox may be picking up some of the Netflix customers who have canceled their DVD rental plans in recent months.

Verizon shares edged up 30 cents to $38.14. After initially falling on the news, Netflix shares gained $2.82, or 2.2 percent, to $129.25.

Netflix already has a couple of powerful competitors with video streaming services. Amazon.com provides a library of movies and TV shows to subscribers to its Amazon Prime shipping services. Wal-Mart, the world’s biggest retailer, has a streaming service called Vudu. Neither offers DVD rentals.

Netflix, though, isn’t devoting much attention to its DVD rental service because it’s convinced the discs are destined to become obsolete. Netflix lost 2.8 million DVD subscribers in the final three months of last year alone.

Netflix is hoping to differentiate itself from its rivals with a larger library that is just now starting to include content that hasn’t been available anywhere else. The company’s streaming library consists largely of older movie shows and TV episodes from past seasons. Netflix’s first original TV series, an eight-episode drama called “Lilyhammer,” debuted Monday. Other original TV series are coming in an attempt to make Netflix more competitive with Time Warner Inc.’s pay-TV channel HBO.

The additional competition in Internet streaming comes as Netflix recovers from the customers losses it absorbed last year following its price increase and a botched plan to spin off its DVD service into a separate website.

Redbox now claims to be the biggest DVD rental service in the country.

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AP Technology Writers Michael Liedtke in San Francisco and Ryan Nakashima in Los Angeles contributed to this report.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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