Verizon announced Monday that it is taking a crack at the video streaming business. The company is joining forces with Coinstar, the parent company of popular DVD rental kiosk business Redbox — a move that will take on rival video rental company Netflix. The alliance will mark Verizon’s first foray into video streaming outside its network operating region as the telephone company so far only offers Web video services to subscribers using its FiOS TV service which competes with cable providers like Comcast Corp and Time Warner Cable. However, investors in Verizon and Coinstar were unimpressed as the pair offered little detail about the service. Netflix shares ended up 2.2 percent, reversing a decline that came directly after the news.
However, Verizon/Redbox’s success in competing with Netflix and other online rivals like Amazon.com and Hulu Plus, will depend hugely on the price of the service and the depth of content it has available, according to analysts. Netflix’s pricing currently starts at $7.99 for either streaming only or a single DVD by mail. To get both the streaming and DVD rental package prices start at $15.98. Verizon, which didn’t elaborate on prices or service details, plans to roll out streaming to customers nationwide later this year. It will give them access to DVD and Blu-ray discs in addition to streaming movies. Customers will be able to access the streaming content on devices such as smartphones, tablets, computers and TVs.
Some media executives said Monday that they welcome another deep-pocketed player bidding for their content. But it remains unclear whether Verizon and Coinstar have the stomach to pay the hefty online-content licensing fees that Netflix has used to seduce wary media companies. Netflix has committed to spend several billion dollars in such fees over the next few years. Several media executives have said that Verizon is willing to pay similar rates to Netflix for content, but initially offer a narrower array of content.
I agree that Netflix should be very worried, because between this, Hulu, and their missteps with their customer base, they run the risk of being left without a chair (deep-pocketed partner or content provider) when the music stops. FIOS will be in most homes willing to pay for streaming within 5 years. In 5 years you will see fiber jacks on TVs which is the last 100 meters of the delivery. Verizon is a leader in this space. Redbox leads the low cost DVD kiosk market for those homes not able to afford streaming. Lets call that the other 80%.
The news comes as Netflix last week announced it had added 220,000 streaming subscribers in the fourth quarter and posted revenues of $876 million, beating Wall Street forecasts. The company ended the quarter with 24.4 million total subscribers, 21.6 million of whom subscribe to Neflix’s video streaming service. About 10.4 million subscribers continue to get streaming plus DVDs. Netflix experienced a steep drop in stock price in 2011 after hiking prices for some users and launching a rebrand of its DVD-only service called Qwikster