New York- Redbox and Verizon announced on Monday that they are forming a joint venture to stream video on Verizon’s network while distributing DVD videos through Redbox’s large kiosk operation.
Redbox is an automated retail segment of Coinstar which runs over 35,000 DVD kiosks in supermarkets, drug stores, convenience stores, and restaurants.
Verizon is a large telecom business that provides communication services running through two segments, Domestic Wireless and Wireline.
The new joint venture will be majority owned by Verizon with a 65% stake.
“Verizon is embracing streaming” said Bob Mudge, president of Verizon consumer and mass business markets.
Verizon will handle the technical infrastructure issues and could potentially acquire digital content rights from the content studios. However, the companies would not comment if any deals were in place with studios.
Both companies will market the new entertainment service to their loyal customer bases although the new unnamed service will also available to non-Verizon customers. Verizon-Redbox has plans to introduce their product lineup in the second half of 2012.
By combining streaming and DVD distribution, both companies are poised to benefit from each others’ large customer bases.
Redbox has over 30 million active customers while Verizon has approximately 109 million wireless and 9 million broadband customers.
Verizon is making a deeper investment with home entertainment while the company already has a significant footprint with its T.V. cable and movie cable distribution format.
“When you consider the core elements the parties bring to this venture – our powerful brands; our national rental kiosk footprint; our anytime, anywhere network presence; and our mutual commitment to customer-focused innovation – it’s clear that Verizon and Redbox are a powerful entertainment team,” said Verizon’s Bob Mudge.
Yesterday’s press release stated that the joint venture will offer “subscription services and a flexible and affordable service that will allow all consumers across the U.S. to enjoy videos wherever they want, whenever they choose, using the media and devices they prefer.”
Yesterday, Coinstar posted an impressive quarterly earnings report, showing that Redbox is increasing DVD sales during a peiord of time when Netflix is scaling down their mail order DVD segment following their botched attempt to raise subscription prices, split the company, and rename their DVD segment Qwikster, a name that flopped and caused investor fury. Netflix CEO Reed Hasting eventually issued a mea culpa and attempted to make amends with Netflix’s disenfranchised customer base.
Since the Netflix-Qwikster debacle, Redbox appears to have captured a segment of Netflix’s disenfranchised DVD customer base. During yesterday’s earnings report, Redbox showed solid quarterly increases in sales with their DVD sales. Bloomberg reports that Redbox’s 4Q 2011 sales showed 77 million in profits, up from 53 million in 3Q, 2011 and 47 million in 2Q 2011. Bloomberg West Editor Cory Johnson reported that Redbox has gained 37.8% market-share of the DVD rental business.
The streaming business is currently a crowded field with Netflix, Amazon, Vudu-Walmart, and Dish-Blockbuster all streaming movies. Hulu only streams T.V. programs. The closest business model that Redbox-Verizon resembles is Dish-Blockbuster which also offers DVD kiosks through Blockbuster stores and various other places in addition to streaming packages.
Competition looks to be fierce in the months ahead while Redbox- Verizon attempt to outperform their rivals by offering better entertainment deals for their customers.