On Monday Verizon Communications said it had teamed up with Redbox parent company Coinstar to provide a movie and TV subscription service similar to Netflix. While the details were purposely not disclosed, Verizon said it would own a 65-percent stake in the joint venture, providing the streaming portion. Coinstar's Redbox arm, owning 35-percent, would provide the physical media: DVDs and Blu-ray discs.
"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.
This joint venture could mean bad news for Netflix which depends on the USPS to deliver physical content. With Redbox, subscribers to the joint Verizon/Redbox venture could merely walk to the nearest kiosk -- which is seemingly on every street corner -- to retrieve and return movies rather than wait for the mail as subscribers do with Netflix.
But now there's an interesting twist which should make Netflix even more nervous. Coinstar announced on Tuesday that Redbox has agreed to purchase assets of NCR Corporation's entertainment line of business for up to $100 million. These assets include DVD kiosks, certain retailer contracts, and DVD inventory.
However the DVD kiosks in question are roughly 9,000 existing Blockbuster kiosks, meaning Redbox and Verizon will claim even more street corner territory. Redbox, which currently has 35,400 kiosks installed nationwide, will rebrand the acquired Blockbuster kiosks with its Redbox label.
"We are very pleased to enter into this agreement with NCR," said Scott Di Valerio, chief financial officer of Coinstar, Inc. and interim president of Redbox. "As the global self-service solutions leader, NCR has strong technology, manufacturing and servicing capabilities, and we look forward to leveraging their expertise as Coinstar continues to grow its core automated retail businesses and expands its offerings."
Last year, reports surfaced that Blockbuster would possibly launch its own Netflix killer, a separate service from the version it supplies to Dish Network. But the rival service was eventually revealed to be a gimmick in recruiting potential Dish Network subscribers, offering streaming and physical media provided by Blockbuster for one monthly fee. NCR's sale of Blockbuster's kiosks could be a sign that the video retailer is pulling out of the street corner business, and focusing on Dish Network instead.
Redbox will likely move previously-owned Blockbuster kiosks -- those physically residing next to Redbox kiosks -- to other locations to expand the upcoming Verizon-Redbox service.
Verizon Communications did not comment on the purchase.