Verizon, Redbox Plan New Streaming Venture (Updated)

Rollout in second half of the year and service will also offer discs

Verizon and Coinstar Inc., owner of the Redbox video rental kiosks, announced plans for a new video service that will offer physical and digital options to customers nationwide.

"Our customers want more access to our service and by partnering with Verizon we'll be able to give that to them," Galen Smith, senior vice president of finance at Redbox, told TheWrap.

The new venture would, like Netflix, offer customers a choice between physical discs and streaming. But it appears that they would pick up and return their discs at Redbox kiosks rather than receive and return them by mail, like Netflix customers do.

It would also be run as a subscription service, Smith said. 

There were few specifics in Monday's announcement, but the companies said more details would be released soon.

Also read: Redbox and Verizon Getting Hitched

The product rollout is expected in the second half of this year. It will combine "the convenience, simplicity and value" of Redbox's DVD and Blu-ray rentals with Verizon's streaming and downloading, according to a news release.

The move comes as studios such as Warner Bros. have tried to limit Redbox's access to new releases. Last month, the studio announced it would not sell discs to Redbox unless the company agreed to wait 56 days from when new releases go on sale to offer its DVDs and Blu-rays. Redbox said it will ignore the delay and simply buy the discs from a third-party distributor.

Though tensions with studios have become more pitched, executives at Redbox and Verizon said they did not think it would impact their ability to offer movies via their new service. They would not, however, say if any deals were in place with studios. 

"We are extremely confident that when we go to market, we will do so with a broad array of titles," Eric Bruno, vice president of product management at Verizon Telcom, told TheWrap. 

The venture had been expected since at least December, when TechCrunch reported Redbox and Verizon were planning to collaborate on a new challenger to Netflix. TechCrunch said then that the new venture would stream content to smartphones, Google TV, Xbox and Roku. There was no specific mention of smartphone streaming in Monday's release, but it did say customers would be able to access videos "using the media and devices they prefer."

The venture is a limited liability company with Verizon holding a 65 percent ownership share and Redbox holding a 35 percent ownership share. Additional terms were not disclosed.

The companies said that a title for the new service would be announced shortly and would likely draw on elements of both companies' names. 

"We can guarantee that it's not going to be called Qwikster," Bruno joked, referencing the title of Netflix's failed attempt to spin-off its DVD-by-mail business. 

Here's the release:

NEW YORK, Feb. 6, 2012 /PRNewswire/ — Verizon and Coinstar, Inc. today announced the formation of a joint venture that will create a new choice for quality- and value-conscious consumers seeking a simple and affordable way to access the video entertainment they crave.  The venture's services will offer all of the convenience, simplicity and value of Redbox® new release DVD and Blu-ray Disc® rentals combined with a new content-rich video on-demand streaming and download service from Verizon.

The joint venture plans to introduce the product portfolio in the second half of 2012.  It will offer subscription services and more in an easy-to-use, flexible and affordable service that will allow all consumers across the U.S. to enjoy the new and popular entertainment they want, whenever they choose, using the media and devices they prefer.  Additional brand and product information will be revealed in the coming months.

"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, chief executive officer of Coinstar, Inc.  "This alliance is the result of a deliberate and strategic process to identify a partner who shares our commitment to delivering innovative solutions to consumers.  We look forward to rolling out the shared benefits this venture will bring to consumers, retailers, and shareholders."

This venture between Verizon and Redbox will create the kind of national multi-platform product that customers are demanding from video entertainment service providers.  It will leverage Verizon's industry-wide relationships with entertainment content providers, its advanced cloud computing technologies and state-of-the-art IP network infrastructure to distribute video on-demand content to its customers. 

"The joint venture will combine the accessibility and value of Redbox with Verizon's vision for a borderless lifestyle – where consumers easily accomplish what they want or need to do, on their terms, through the power of the network," said Mudge.  "Together, we are erasing old technology boundaries, freeing people to spontaneously enjoy the entertainment they want, whenever they choose, using the devices and media they prefer, at home or away."

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 joint venture is a limited liability company with Verizon holding a 65 percent ownership share and Redbox holding a 35 percent ownership share at the outset.

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