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Redbox Hits Netflix with a Strong Right Hook

We have a Blockbuster store in our town that is still open for business but you wouldn’t know it when you drive by. But if you go down a block to the grocery store any evening, you’ll have to navigate your way around the line of people waiting to hit the Redbox DVD machine.

Now that Redbox has the hard-copy, DVD rental biz sewn up, it’s time to move on to the streaming biz. That means competing with Netflix. Even with all their recent troubles, the online DVD rental company has carved out a deep niche for themselves.

Redbox isn’t worried. They have a plan and a partner – Verizon.

According to the press release, the new venture will go live in the second half of 2012. Thanks to what each partner brings to the table, the service will combine a choice of streaming and hard-copy rental. It appears that both options will be available under the plan, but the press release doesn’t talk in specifics or dollars.

Splitting the DVD rental biz from the streaming biz, is one of the moves that got Netflix in trouble recently. It stemmed from a price increase that forced customers to take both services and some badly phrased apologies from the Netflix pres.

Redbox and Verizon will be coming in fresh, so they likely won’t have to deal with price backlash. They’re also coming in as the underdogs and who doesn’t love that.

The real kicker will be who gets which movies first. When Netflix was the only game in town, studios were licensing content for a fraction of the worth. In the past few months, things have changed with studios.

Just this past week, a new deal went into effect, pushing back the release date of all Warner Brothers films on Netflix. In order to increase DVD sales, Warner is holding on to their properties for 56 days before making them live. Even worse, they’ve put a 28 day hold on putting movies into the queue. Not good news for Netflix.

And neither is this Redbox deal. Redbox and Verizon are excellent partners as you can see from the graphic they prepared:

See all the happy people? Netflix better watch out.

  • http://vitamincm.com Christopher Masiello

    Cynthia,
    I agree that this will take some market share away from Netflix, but I don’t see it as cut and dry as you.

    A. Not sure how Redbox has the physical DVD market sewn up? Netflix ships 1 Million DVDs every day.
    B. The studios are going to play hardball with all of the players now that they have other suitors. This will make it hard on everyone.
    C. Verizon does a wonderful job of making Dumb Pipes. Name a single content or customer service thing that they ever get right. Redbox is a wonderful, elegant experience. Hopefully those hacks at Verizon don’t screw it up.
    D. I really hope you are at least partially right. Healthy competitors in the same space is good for all of us.