Verizon and Redbox Go Online to Battle Netflix
Up until now, Verizon has distributed television and movie content on a local basis for consumers signing up for its Fios service. Redbox has offered DVDs nationally to consumers through its kiosks located outside retail stores and fast food restaurants. Now, the companies have combined in a joint venture that will enable them to stream content online to any consumer paying an as yet undetermined monthly subscription fee.
"The most instant way for customers to access content is to have the option of either pushing a button or going on a two-minute drive to the store," Bob Mudge, president of Verizon consumer and mass business markets, said in an interview quoted by the Los Angeles Times.
The combined power of the joint venture would appear to be strengthened by the announcement that Redbox parent Coinstar had reached a deal to acquire NCR’s 10,000 video kiosk business for $100 million. Most of NCR’s kiosks currently operate under the Blockbuster brand.
In another LA Times article, Coinstar CEO Paul Davis said the deal to acquire NCR’s kiosks, pending regulatory approval, was "a testament to the fact that we believe in the physical space."
- Verizon and Coinstar’s Redbox Form Joint Venture to Create New Consumer Choice for Video Entertainment – Verizon/Coinstar, Inc./PRNewswire
- Redbox and Verizon to create streaming movie service – Los Angeles Times
- Redbox agrees to buy NCR/Blockbuster kiosks as revenue surges – Los Angeles Times
- Verizon-Redbox Streaming Video Service to Take on Netflix – Advertising Age
Discussion Questions
Discussion Questions: What is your take on the joint venture between Verizon and Redbox? How will the joint venture along with the Redbox deal to acquire NCR’s kiosks affect the video retailing business?
I feel like Tom Hanks in the movie “Big.” I don’t get it.
I can understand the desire to have instant access to a movie, not having to go to one of the thousands of Redbox locations only to find it is already rented out, etc. However, I had a hard time understanding why people would want to watch a movie on their computer. Even with a large desktop screen it is still a small picture to watch. Yes, I admit I have downloaded or rented a movie to watch on my laptop on a plane, but that is far different that committing to a monthly fee for the right to do so regularly at home.
Adding to my amazement is the statements from Coinstar’s CEO that “Consumers who instantly want a new release can go to a kiosk and get it,” … “For titles that are a bit older, there will be streaming capability.” If I understand that correctly it means the new releases which are the backbone of movie rentals are not going to be available by the new service.
Netflix seems ripe for the pickins. Its streaming content remains woefully inadequate (it costs me $9 a month and is probably worth about that, maybe less), for reasons I can’t comprehend. It has no terrestrial presence. Verizon has a growing delivery vehicle which negates the need for additional applications or boxes.
I don’t understand why NCR sold the kiosks at all, but it certainly cleans things up for Redbox. I don’t know how big the kiosk future is, but I don’t like media, so I’m not a great judge. I prefer to have everything digital.
I like the concept — streaming digital content and convenient DVD pickup, which competes directly against Netflix current offerings. However, as a practical matter, I agree that the kiosk can’t really compare to Netfix’s mail service. The reason is inventory. When it comes to content, it’s about the depth of inventory, and that isn’t feasible in a kiosk. Nice try.
It is all about content. Verizon has a pipeline to consumers and only select content. Bill Gates predicted the merging of entertainment through digitization years ago and now it is upon us. Apple has been highly successful selling digital audio content. Now the race is on for on-demand video. Netflix hastened the demise of Blockbuster by providing a more convenient product. Apple, Netflix and now Verizon would like to duplicate Apple’s audio success with video. Redbox has content and by linking with Verizon, increases their buying power. This is important to be able to purchase new releases. I predict limited success streaming video to smartphones, but great success streaming video to tablets.
Any competition to Netflix is a good thing. It’s all about content. Whoever can deliver the most content for movies (new and old) and TV shows will be king.
Look beyond the shores of the U.S., particularly to the Pacific Rim. You see a consumer group in these countries that are rapidly embracing streaming video of all kinds — shorts, movies, and advertisements.
This becomes a smart move on Verizon’s part to team with Redbox. The later is equipped to act as an innovator, and the former has the political clout to navigate through the broadband battles that are part of the multi-billion dollar pie that the FCC wants to control for “taxing” purposes.
The Millenials are moving forward into this video space. Generation X won’t be too far behind. There is opportunity, because consumers will want the app.
Less than 70% of American households have cable. The other 30% are looking for digital entertainment that costs less, and kiosks work for them. It’s a mystery why Dish dismantled Blockbuster as quickly as it did.
I believe this will do what iTunes did for music by making movies more affordable and more accessible.
The physical distribution model is a short-term solution that will soon be disappearing. Live content streaming is the demanded format and will become the status quo on all media as connectivity continues to become better. This is a Band-Aid of a deal until Verizon gets its own contracts and manages these in-house. Apple, Amazon, Hulu and others are the suppliers who are already there, and they have models in place that already provide streaming content.
“When it comes to content, it’s about the depth of inventory, and that isn’t feasible in a kiosk. Nice try.”
For some consumers that is no doubt true. They know what they want to watch and would rather watch nothing at all if that selection is not available. But for many (many more?) consumers entertainment is about immediacy. That is the driver of the Redbox model. I can watch something that is not on TV — without going to the theater and spending ten bucks — NOW.
There is certainly an argument, that many have been making since Redbox launched, that this puts kiosks squarely in the path of streaming video and soon to be obliterated.
Fortunately for Coinstar stockholders, in this case, Bob Marley was closer to right than the analysts (“soon come mon, soon come” — only to arrive much, much later on island time).
I’ll have a pina colada and 100 more shares of Coinstar, please.
It’s about time, and I’m sure only the beginning. Like all other good, new retail ideas, this is great news for consumers — at least for the near future.
Odd that movie theaters weren’t mentioned in our ‘most to lose’ list. Look out AMC. Who got clobbered most by music and book’s flight to digital availability? Bricks and mortar.
It is open season on Netflix. The JV gives Coinstar/Redbox needed investment dollars and additional distribution channels. More customers are consuming content on mobile devices.
I’ve been following CSTR for several years and they own the 5th wall; this only strengthens the position and value proposition.
Verizon knows that content, especially entertainment, is what makes mobile devices desirable, and on-demand content makes them downright sexy. Verizon’s partnership with Redbox isn’t limited to mobile entertainment delivery (phone or tablet) — harnessing the integration of mobile devices into the overall home or personal entertainment environment will be the real sweet spot. It’s currently possible to stream iTunes movies and music from your iPad to your HDTV and (AirPlay-enabled) home entertainment systems but similar tech from other companies is proliferating quickly. On-demand content is the key to staying competitive.
I’m not impressed. If Time-Warner got its act together, it could destroy anyone, because of their delivery system. Charge a flat fee per month instead of on-demand premium pricing, and Ding-Ding … you’ve got a winner.
Wow, this is great IF you will be able to stream the most current offerings from Redbox. However, I don’t think this will be the case even though nothing is mentioned in the above article. What I suspect is that this is a PR article only designed to hold on to current Verizon customers and to throw some fluff at the regulators. I don’t think the Verizon system can handle the addition of tens of thousands of downloads per hour (knowing the average movie is about 2 hours). That is a lot of bandwidth. The guys at AT&T have to be rolling in the isles over this one!
The one that would seem to be making out here is NCR, who branded their distribution service “Blockbuster” but their right to the name runs out in 2016. Dish network owns Blockbuster and had no plans to extend name usage to NCR. So in 4 years, NCR would have been faced with rebranding and repainting. In short, this is a story on a slow news day, but won’t mean anything significant to either party other than slower service from Verizon.
It makes sense for Verizon to forge partnerships like this. The combination of physical and digital distribution of movies can provide added value to Verizon’s FIOS and Wireless offerings. Blockbuster, after being acquired by Dish, is similarly tying exclusive streaming services to a particular distribution system. The question is whether consumers embrace these offerings in relation to Netflix’s “carrier-neutral” model of access and distribution.
I’m bullish on Redbox. It’s a new paradigm that makes movie rental easier for lots and lots of people. It indulges impulse shopping for movie rentals, and it’s friendly to the segment of the populace that views online streaming as a frighteningly technical form of entertainment. The other neat thing about Redbox is that the company already is internet savvy and thinking of using online to augment its experience. You can go online to Redbox, choose your film, and find out which boxes in which locations have this film available for you right now. It’s an incredibly useful and customer-centric bit of functionality, and it makes Redbox as an interesting clicks-and-mortar case study akin to how big box retailers are fusing their physical and online shopping experiences.
I’ll be interested to see how this venture comes together. These cooperative joint things are always hard, and many of them have failed dismally over the years. But if they can make this one work, they could do very well.