Verizon and Redbox Develop New Video Service to Battle Netflix

After Netflix unveil its first original series, Verizon and Redbox are developing a new video service to compete against Netflix, which will combine Redbox's kiosk DVD and Blu-Ray rental service with streaming and downloadable video content made possible by Verizon's network. Specifics are scant at this point, but the new service seems primed to compete more directly with the once-thriving-now-struggling Netflix: like Netflix, the Redbox-Verizon service will apparently be subscription-based, meaning customers will pay a flat fee for access for to both physical DVDs from Redbox machines and an online trove of content available for both "on-demand streaming and download."

The companies said that the joint venture will launch in the second half of the year, and it will combine Redbox DVD and Blu-ray rentals with an on-demand streaming and download service from Verizon. The service will offer "subscription services and more," and it will be available on multiple platforms like smartphones, tablets, and televisions. Due to "competitive concerns," however, Verizon and Coinstar declined to provide details on exactly what they will offer or how much it will cost, and did not take questions during a Monday morning conference call. Redbox has DVD kiosks in supermarkets, drug stores, and other locations nationwide. Customers can reserve movies or games on their computers or smartphones, pick them up from a nearby location, and return them when finished. According to an NPD survey from last month, Redbox is now the most popular source of DVD and Blu-ray disc rentals.

Netflix customers pay a flat fee for an unlimited amount of movies and television shows, which they receive by mail or by streaming over the Internet; Redbox, meanwhile, has unleashed an army of DVD vending machines on the supermarkets and big box stores of America, offering rentals on a pay-per-night basis. With its partnership with Verizon to bring content to the web, however, Redbox is entering Netflix's territory; the company's CEO Reed Hastings has reiterated many times that he believes streaming media, not the physical DVD, is the future of his company. Redbox and Verizon join Amazon, Hulu, Dish Network/Blockbuster, and the movie studios' Ultraviolet as upstart competitors looking to unseat Netflix in the streaming space.

Redbox has kiosks at 29,000 locations nationwide, including grocery stores, convenience stores, drug stores, and at some Wal-Mart stores. "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," the companies said. Netflix is struggling after a shaky 2011, Verizon and Redbox will still have their work cut out for them. No mention of specific content was made, but Verizon said it will use its "industry-wide relationships with entertainment content providers" to ensure a good selection of movies online.