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Posted at 11:34 AM ET, 02/06/2012

Verizon joins with Redbox to take on Netflix

Attendees check out the unveiling of 4G devices Jan. 6 at the Verizon booth during the Consumer Electronics Show in Las Vegas. Challenging Netflix, Verizon said Monday that it will start a video streaming service later this year in cooperation with Redbox and its DVD rental kiosks. (Isaac Brekken - AP)
Verizon Communications and Redbox on Monday announced a video entertainment joint venture directly aimed at online streaming giant Netflix.

Verizon and Coinstar, the parent company of movie vending machine service Redbox, announced they will jointly provide users with online streaming and video rental services starting in the second half of the year.

The venture isn’t exclusive to Verizon network customers, but the firm said it will be aggressive about marketing the venture. Analysts said they expect that means Verizon probably will offer deals on the service to attract new Internet subscribers and keep customers from leaving rivals who are ramping up efforts to lure away 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 Bob Mudge, president of Verizon consumer and mass business markets.

The move signals another step by Verizon to bolster its network offerings through new partnerships with cable and entertainment services.

Verizon is currently seeking regulatory approval from the Justice Department and Federal Communications Commission for its purchase of airwaves that would bolster its national wireless network. Justice is investigating whether a cross-marketing agreement by Verizon and cable companies is anti-competitive. Analysts say the marketing deal could lead to the demise of Verizon’s FiOs service — a competitor to cable Internet providers.

The Verizon and Redbox venture comes as cable and Internet carriers struggle to keep customers from abandoning paid television services.

Online streaming of videos has exploded in popularity. Netflix, which suffered a massive public relations flap over the past year, has quickly recovered and reported strong subscriber gains in the past quarter.

“Some argue that online streaming for these carriers is cannibalizing of their core product, but it’s not. It’s a necessity and hedging your bets,” said Jeff Silva, analyst at Medley Global Advisors.

Verizon will own 65 percent of the venture and Redbox will own 35 percent. Redbox has 35,000 movie rental kiosks across the country.


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By  |  11:34 AM ET, 02/06/2012

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