Redbox Inks Out-Of-The-Box Deal With Verizon
by Thom Forbes,
I’m not saying that there are folks who regret canceling their Netflix subscriptions entirely because of its perceived arrogance in raising its prices as much as it did last year. I’m just saying that I’ve heard some grumblings out there — call it terminator’s remorse — from people (very close to home) who’ve discovered that the alternatives aren’t quite as good. Now one of consumerdom’s favorite villains, The Phone Company in the guise of Verizon, is getting into the fray by teaming up with Coinstar subsidiary, Redbox, to offer another combined service.
“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,” says Bob Mudge, president of Verizon consumer and mass business markets, in a release. “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.”
Together, in other words, they are taking on Netflix. The combined service is expected to roll out in the second half of 2012. The companies did not disclose pricing but analysts expect that it will be almost half of what Netflix charges (which would be close to what Netflix used to charge), according to the New York Times’ Amy Chozick.
Redbox is the nation’s top DVD rental company with nearly 30 million active users, compared with 24.4 million Netflix subscribers in the U.S., reports Ben Fritz in the Los Angeles Times. But the Redbox machines only carry about 200 titles. Eleven million Netflix customers subscribe to its DVD delivery service, with a much broader array of titles.
“Netflix is a bigger moneymaker, generating $3.2 billion in revenue last year compared with $1.6 billion for Redbox,” Fritz writes.
Redbox also announced yesterday that it is buying approximately 9,000 blue-and-yellow Blockbuster kiosks from NCR for up to $100 million. NCR holds a license to use the Blockbuster logo. Blockbuster’s assets were acquired by Dish Network last year.
Verizon will own 65% of the new joint venture. All broadband customers -– even those who are with other carriers -– will have access to the service. Verizon “is gambling that the advantages of gaining a nationwide customer base would outweigh the risk that a less expensive online-video offering could undercut the lucrative pay-TV part of [its broadband] FiOS’s business, which reaches about 14% of households,” write Anton Troianovski and Sam Schechner in the Wall Street Journal.
“It’s the best of both the physical and the digital,” Coinstar CEO Paul Davis tells Chozick. “We’ll target existing customers, but we’ll also be agnostic as to where you get your broadband,” Mudge says. Even if you don’t have Verizon, “you’ll get Redbox-branded content.”
Troianovski and Schechner point out that traditional media executives have been perplexed by how to respond to the growth of Netflix. “Many want to cash in on a big new source of revenue,” they write. “But others worry that the new services, which often don’t include ads, could eventually train a new generation of viewers that they don’t need to watch traditional TV.”
So far they’ve compromised by mostly making deals for older content –- and therein lies the rub. Wired’s Tim Carmody, for one, isn’t all that impressed by the new alliance, at least in the initial stages, for precisely that reason.
“After all, without competitive content, it’s just Redbox — which more or less remains the same as it is — tied to a vanity digital video project from Verizon,” he writes. “Both companies are looking for something, anything to both differentiate itself from and catch up to Netflix, Amazon, HBO, other telecoms and the rest of the companies carving off slices of the digital video market.”
“The content partnerships for digital streaming will be the key to the services’ success,” writes Carmody. Executives from Redbox and Verizon tell him “their offering will include a broad and deep array of content, competitive with everything comparable in digital VOD on the market today” and they suggested that they might also pursue exclusive or multi-tiered streaming agreements.
“Redbox and Verizon will enter a competitive landscape for digital movie rentals that includes not only Netflix but also Amazon, Dish Network and its subsidiary Blockbuster, and Wal-Mart’s Vudu,” the LAT’s Fritz points out. One thing that’s for certain: The streaming genie has been unleashed and it’s not going back into the box –- Red or otherwise –- as the plot for the subscriptions of the consumer thickens.