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Redbox, Verizon join forces to rent movies through streaming video, kiosks

Streaming Redbox movies across Verizon platforms, including mobile phones, is part of the plan.

DOUGLAS E. JESSMER | Times photo illustration

Streaming Redbox movies across Verizon platforms, including mobile phones, is part of the plan.

LOS ANGELES — Betting that a combination of Internet streaming and kiosk DVD rentals can give consumers the most complete package in a fractured media landscape, Redbox and Verizon are teaming up on a movie rental service to launch in the second half of this year.

The still-unnamed business will challenge Netflix by offering a combination of streaming video on digital devices along with rentals from Redbox's more than 35,000 kiosks for a flat monthly fee. The two companies believe that combining the two is the only way to give consumers a comprehensive selection of movies.

According to a regulatory filing by Redbox parent Coinstar, the joint venture will be owned 65 percent by Verizon and 35 percent by Coinstar. While full financial details were not immediately available, Coinstar is initially contributing $14 million for its stake, an amount expected to increase significantly as the joint venture's capital needs increase.

Due to complex rights issues, Netflix's streaming service offers a hodgepodge of older and independent films, as the rights to most new releases from major studios are controlled by pay cable networks like HBO for up to a decade after they appear in theaters.

Redbox's kiosks offer newer movies on DVD and Blu-ray at grocery stores and other retail locations that the company says are a five-minute drive or less from more than 70 percent of Americans. But the machines carry only about 200 titles, a fraction that can be offered on the Internet.

"Consumers who instantly want a new release can go to a kiosk and get it," said Paul Davis, chief executive of Coinstar. "For titles that are a bit older, there will be streaming capability."

Netflix also offers DVDs along with Internet streaming, but customers need to wait at least two days from the time they return one disc until they receive a new one. In addition, the company is attempting to wind down its DVD-by-mail service and transition all of its customers to streaming, while Redbox wants to keep its kiosk business strong for years to come.

Redbox said in late 2010 that it would work with a partner to move into the digital space and has been seeking a deal ever since. It settled on Verizon last year. The telecom giant will handle technical infrastructure and acquire digital content rights from studios. Both companies will market the service to their customer bases.

Redbox has more than 30 million active customers and Verizon has nearly 109 million wireless and nearly 9 million broadband customers.

Reeling, recovering

Some key events involving Redbox rival Netflix since a backlash against it began over the summer:

July 12: Netflix says it will raise prices by as much as 60 percent for millions of subscribers who want to rent DVDs by mail and watch video on the Internet. The company decided to separate the two options so subscribers who want both must buy separate plans totaling at least $16 per month. Netflix had been bundling both options in a single package starting at $10 per month.

Sept. 1: The price hike begins to take effect for existing customers. New customers had the new prices immediately.

Sept. 18: Netflix CEO Reed Hastings apologizes, but keeps price hike in effect. Company creates more anger when it announces plans to split into two services — Netflix for the streaming, and Qwikster for the familiar discs in red envelopes. That means subscribers have to visit two websites to make movie requests and update billing information.

Oct. 10: Netflix backs away from plan to split its services.

Oct. 24: The company discloses that it lost 800,000 U.S. subscribers in the July-September quarter, ending with 23.8 million. That loss is more than the 600,000 that Netflix had predicted.

Dec. 6: Hastings appears before an investors conference in New York, where he laments the company's recent mistakes, but predicts they will be forgotten as Netflix's Internet video service continues to reshape the entertainment industry.

Jan. 25: Netflix releases figures showing it regained almost as many U.S. customers as it lost after the price hike. It ended December with 24.4 million subscribers in the United States, a gain of 600,000 from the end of September. The results came after the close of market, and the company's stock soared 22 percent the next day.

Associated Press

Redbox, Verizon join forces to rent movies through streaming video, kiosks 02/06/12 [Last modified: Monday, February 6, 2012 9:05pm]
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