Verizon teams up with Redbox to take on Netflix

Verizon Communications Inc. is all set to enter the online streaming industry in partnership with Redbox to challenge the likes of Netflix. Verizon and Coinstar Inc. the company behind Redbox, made the announcement public, the service offered will be throughout the U.S and can be used also by non-Verizon customers. The move comes as no surprise, as Verizon has set its sights on becoming a leader in home entertainment as it already owns a cable-TV service.

The business model is somewhat close to what Netflix and Dish Network Corp already offers, combining the delivery of Internet movies along with DVD’s. The fine print about the deal has not yet been revealed, although pricing is expected to be way below the $16 mark, which is the minimum subscription for combined DVD-by-mail and streaming plan through Netflix.

On the other hand, Redbox’s collection is limited in comparison to Netflix; which owns a library of more than 100,000 movies. Customers will also have to go up to the store to pick up their DVD’s to spare the company from mailing costs. Don’t expect Redbox to match the Netflix inventory overnight, Netflix themselves have found it difficult and expensive to build such a database. The video licensing cost commitments for rights world-wide amount up to $3.9 Billion. It also prompted them to increase their subscription fees by more than 50% in 2011.

Redbox has been looking to expand into the streaming business from their solid base of more than 29,000 stores for over a year; they have also admitted to have acquired about 36 Million e-mail addresses from DVD renters, which will help them in their marketing campaign. Verizon’s own experience in the cable-TV market has provided a great lead to get Hollywood studios and other producers on board to negotiate streaming rights.

The service is expected to roll out in the second-half of the year, which will include Internet streaming, DVD and Blu-ray discs. Redbox or Coinstar Inc. has invested $14 Million into the venture and will own 35%, while Verizon will own the rest.

The move will all set to fire-up the streaming industry, Netflix ended the year with about 25 Million subscribers in-spite of losing 2.8 Million in the final quarter of 2011. They already face stiff competition from the likes of Amazon and Wal-Mart and we’ll have to wait and see how Verizon and Redbox affect their market share.

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