NEW YORK — Phone company Verizon Communications will challenge Netflix and start a video-streaming service this year with Redbox and its DVD-rental kiosks.
Verizon and Coinstar, Redbox’s parent company, said Monday that the service will be national and available to non-Verizon customers. It adds another dimension to Verizon’s quest to become a force in home entertainment, and it looks set to compete to some extent with the cable-TV services it already sells.
Unlike competing services from Amazon and Wal-Mart, the new service will combine Internet delivery of movies with DVDs, the way Netflix does. Douglas County-based Dish Network also offers a similar bundle through its Blockbuster subsidiary.
Specific details and pricing of the new plan weren’t announced.
“We’ve made a conscious decision to innovate and get involved with this market because it’s legitimate and growing, and we think the partnership with Redbox gives us huge upside,” said Bob Mudge, president of Verizon’s consumer business.
Late last year, the companies were shopping around a $6-per-month offering that would give subscribers one DVD rental from Redbox per month as well as unlimited streaming of a certain selection of movies, according to a person briefed on the plan then. The person was not authorized to speak publicly and spoke on condition of anonymity.
It’s not known whether the plan has changed since then, though the price is likely to be less than the $16-a-month minimum that Netflix subscribers have to pay for a combined DVD-by-mail and streaming plan.
Although consumers would pay less, Redbox’s inventory is limited to what’s in its kiosks, compared with Netflix’s library of more than 100,000 discs, including more obscure fare. Redbox customers will also have to go in person to pick up a disc, which saves the company mailing costs.
Getting an extensive library of streaming content to rival Netflix’s 20,000-plus titles will be expensive. The rising cost for streaming rights is the main reason that Netflix raised its U.S. prices by as much as 60 percent last year in a move that triggered a customer backlash. At the end of 2011, Netflix had video-licensing commitments totaling $3.9 billion worldwide over the next several years.
Redbox, whose DVD-rental kiosks are in more than 29,000 stores, has been looking to expand into online streaming for more than a year. Its business so far has revolved around renting DVDs for as little as $1.20 per day.
Verizon’s FiOS video business is relatively small, with 4.2 million subscribers, making it the seventh-largest provider of TV signals to U.S. homes. Meanwhile, its land-line phone business is shrinking, so it needs other avenues for growth. Its wireless arm is growing, but it owns only 55 percent of that venture. Vodafone of Britain owns the rest.
Joining the crowd
A new Internet-streaming venture built around Redbox’s DVD-rental kiosks adds to a crowded field of online video-viewing services currently dominated by Netflix:
Amazon’s Instant Video: Thousands of movies and TV-show episodes for online rental for $1 to $5. No monthly subscription plan.
Apple iTunes: Another pay-per-view option to access recent movies or TV shows on an iPhone, iPad, computer or TV using an Apple TV set-top box.
Blockbuster: The on-demand service lets customers rent or buy movies and TV shows. No monthly fees.
Cable: Providers such as Comcast and Time Warner offer on-demand options to their monthly subscribers. Time Warner charges $3 or less for older movies, more for new releases.
Hulu and Hulu Plus: The online service owned by the parent companies of broadcasting networks ABC, NBC and Fox offers thousands of TV-show episodes and movies. Hulu is free; Hulu Plus is $8 per month.
Vudu: Wal-Mart offers streaming movies and TV shows through the site, generally for $2 to $6. Many movies are available for streaming a la carte, the same day they come out on DVD. No monthly subscription plans.
