Redbox Taking on Netflix With New Digital Streaming Movie Service

10:53 PM PST 02/16/2011 by Lindsay Powers

The kiosk DVD rental company's new option will be subscription-based.

Redbox -- the bright kiosks located in grocery stores, fast food restaurants and gas stations that offer movie rentals for as little as $1 a day -- is taking on rival Netflix.

Redbox president Mitch Lowe told analysts Thursday that the kiosk DVD rental company will begin offering subscription-based Internet streaming by the end of the year, the Los Angeles Times reports.

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A monthly fee will give consumers access to movies to on multiple devices as well as discs through kiosks -- and attempt to pick up a few of Netflix's 20 million subscribers to its DVD-by-mail and Internet streaming subscription plans.

Redbox, owned by Coinstar, will partner with another company to offer the service. Amazon.com (which has been conducting its own talks with Hollywood studios in order to acquire more content and launch its own Netflix-like service) and Hulu.com are two partners that have been mentioned, but Lowe has not confirmed.

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With revenue coming in below expectations in the last fiscal quarter, investors have been eager for Redbox to launch a digital service to appease consumers who prefer to watch movies online instead of via DVD. (Revenue was also further impacted by studios like Fox, Universal and Warner Bros. imposing a 28-day rental grace period on Redbox in order to preserve DVD sales.)

Redbox also has another challenge with keeping its prices low.

A new report says that Disney has raised wholesale prices on DVDs it sells to both Redbox and Netflix to $17.99 per new release --  more than the studios typically charge their largest wholesale customers but less than big retail chains like Wal-Mart charge consumers for high-profile new releases.

The company first started charging the higher price with Secretariat, which was released on DVD on Jan. 25.

There are more than 30,000 Redbox kiosks.

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