Verizon Communications Inc. and Coinstar Inc., which operates Redbox DVD rental kiosks in supermarkets and gas stations across America, announced today that they have teamed up to offer a new video service that will go head to head with Netflix Inc., the Wall Street Journal reported.
Verizon will own 65 percent of the joint venture and Redbox will own 35 percent, Reuters reported.
Little detail on pricing or content of the new service was revealed today, but a source told Reuters that the venture would offer movie streaming and one DVD rental at a time from Redbox kiosks for about $6 a month. Netflix customers currently pay at $7.99 a month for either streaming only or one DVD at a time, or at least $15.98 for both, according to Reuters.
Verizon and Coinstar will launch the service in the second half of this year, the Associated Press reported.
Coinstar has 30 million customers who rent an average of about 1.9 million movies a day at 35,000 Redbox kiosks, Reuters reported. Verizon had 4.2 million subscribers to its FiOS TV service at the end of 2011. Netflix had 24.4 million US subscribers at the end of December.
Coinstar said it had already captured some of the 2.8 million Netflix customers who gave up their subscriptions to the company’s DVD-by-mail service during the fourth quarter of 2011, some of whom stuck with just its Internet video streaming service alone, the AP reported.
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"I do think we are picking up Netflix customers," J. Scott Di Valerio, Coinstar's chief financial officer, told the AP. "We have stayed focused on giving the customers what they want."
Hudson Square Research analyst Daniel Ernst told Reuters that competing against Netflix will require deep pockets. "The question is, how much are they investing to get a large library of programming? Netflix is spending up to $1 billion a year on content," Ernst told Reuters. "For me, it's doubtful that these two companies will invest to that level."