Verizon, Redbox joining forces

NEW YORK – Phone company Verizon Communications Inc. will challenge Netflix and start a video streaming service this year with Redbox and its DVD rental kiosks.

Verizon and Coinstar Inc., Redbox’s parent company, said Monday that the service will be national and available to non-Verizon customers as well. It adds another dimension to Verizon’s quest to become a force in home entertainment, and it looks set to compete to some extent with the cable-TV services it already sells.

The new service will combine Internet delivery of movies with DVDs, the way Netflix does. Dish Network Corp. also offers a similar bundle through its Blockbuster subsidiary.

Specific details and pricing of the new plan weren’t announced, though the price is likely to be less than the $16-a-month minimum that Netflix subscribers have to pay for a combined DVD-by-mail and streaming plan.

Fewer options

Although consumers would pay less, Redbox’s inventory is limited to what’s in its kiosks, compared with Netflix’s library of more than 100,000 discs, including more obscure fare. Redbox customers will also have to go in person to pick up a disc, which saves the company mailing costs.

Getting an extensive library of streaming content to rival Netflix’s 20,000-plus titles will be expensive. The rising cost for streaming rights is the main reason that Netflix raised its U.S. prices by as much as 60 percent last year in a move that triggered a customer backlash.

Outside the industry model

With the Redbox venture, Verizon is breaking ranks with the cable and satellite industry, which makes its own video streaming services available only to people who also subscribe to its traditional TV feeds. They don’t want households switching to Internet-only services, which are cheaper. Netflix Inc. charges $8 per month for its streaming-only plan, for instance, while the average monthly cable bill is more than $70.

“We’ve made a conscious decision to innovate and get involved with this market because it’s legitimate and growing, and we think the partnership with Redbox gives us huge upside,” said Bob Mudge, president of Verizon’s consumer business.

Dollars and cents

New York-based Verizon Communications will own 65 percent of the unnamed venture, with Bellevue-based Coinstar owning the rest. Redbox is contributing an initial $14 million to the venture, according to a regulatory filing. It did not say how much Verizon would contribute.

Coinstar’s stock gained 91 cents, or 1.8 percent, to close Monday at $50.56, after initially jumping 6.6 percent on the news. Verizon shares edged up 30 cents to $38.14. After initially falling on the news, Netflix shares gained $2.82, or 2.2 percent, to $129.25.