Redbox Owner, Verizon Form Video Joint Venture to Challenge Netflix

NEW YORK - Verizon and Redbox owner Coinstar on Monday unveiled the formation of a joint venture that will marry "the convenience, simplicity and value of Redbox new release DVD and Blu-ray Disc rentals" with a new video on-demand streaming and download service.

Product launches, including subscription services, are scheduled for the second half of the year, and the companies said further details, such as branding, content details and pricing, would be announced later. Verizon will control 65 percent of the venture that is designed to challenge Netflix and other online video providers.

The partners said they are looking to create "a new choice for quality- and value-conscious  consumers seeking a simple and affordable way to access the video entertainment they crave." They added: "By offering instantly available online and mobile content with immediate access to physical media through rental kiosks, Verizon and Redbox will be uniquely positioned to deliver the best of both worlds – digital and physical – to consumers across the country."

It wasn't immediately clear if the partners had first content deals in place with Hollywood giants that would provide programming for the streaming service.

“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 Bob Mudge, president of Verizon consumer and mass business markets.

“Consumers rely on Redbox for the latest new release movies at a great value, and our joint venture with Verizon will enable us to bring them even more value by offering expanded content offerings and greater flexibility for how and when they enjoy entertainment,” said Paul Davis, CEO of  Coinstar.

The venture will be funded with $450 million from its partners, according to a regulatory filing. It said that the venture has licensed the Redbox brand name. Five years from now, Redbox has the right to require Verizon to take its stake in the venture, while the telecom giant then has the right to call for Redbox's stake.

The venture news is "positive for content providers and ''noise'' for cable," said Wells Fargo analyst Marci Ryvicker. "From a content perspective, we view this announcement as more of a positive than a negative given that this JV represents another purchaser of content."

She added: "From a cable perspective, the impact of this offering will entirely depend on the provided content, and we would view this much like we do Netflix, a complimentary product to traditional video services." 

She also suggested that Verizon could use the new broadband service "as a competitive advantage for [its] FiOS [TV service] in that there is likely to be an over-the-top bundle that may not be replicable from a cable/satellite perspective."  

E-mail: Georg.Szalai@thr.com

Twitter: @georgszalai