The brewing battle between Netflix and Redbox

A Redbox survey hints that the company may be exploring online streaming.

By Kim Peterson Apr 12, 2010 4:13PM
Redbox kiosk. Credit: (© Al Behrman/AP)Netflix (NFLX) and Redbox have been able to grow nicely without locking horns, but that might soon change.

If Redbox, owned by Coinstar (CSTR) is considering getting into the movie-streaming business, the two companies could become fierce rivals.

The question is how seriously is Redbox mulling this move, and how much money does it want to sink into it? The company reportedly sent a survey to customers asking how interested they would be in a movie-streaming service for $3.95 a month.

That price point, which would include four free kiosk rentals, is sure grab Netflix's attention. That's less than half of what Netflix's cheapest plan costs.

Redbox has turned the movie kiosk into an incredible business. In less than seven years, the number of kiosks has exploded from 12 to 22,400, The Big Money reports. You can get a movie at McDonald's (MCD) and at grocery stores. And they only cost $1, a price point that turned out to be an incredibly smart and strategic decision. Post continues after video:

Netflix and Redbox helped doom Blockbuster (BBI) to has-been status. But that feat looks easy compared to the challenge ahead: online streaming.

Netflix is relentlessly pursuing that goal, and has poured hundreds of millions of dollars into building out its online streaming network and acquiring the rights to distribute movies on it. Chief executive Reed Hastings said the company may offer an online-only plan to customers this year.

And Netflix has been busy racking up the partnerships for its streaming service. Now, you can stream Netflix movies from TiVo boxes as well as the Nintendo Wii, the PlayStation 3 and the Xbox 360.
These are not easy feats, and if Redbox wants to go down that road it will have a lot of work to do. But what choice does Redbox have but to consider going online?

Chadwick Matlin speculates on The Big Money that the two companies would have different online audiences:

Redbox would go after the impulse buyer who favors more big-budget fare. Netflix would cater to the person who wants a deep library of meaningful, arty classics. It’s essentially Avatar vs. The Hurt Locker all over again. But like Avatar, Redbox’s magic may not be as impressive online.
Of course, this is all speculation at this point. But it's fun to think about the competition between these companies, and if they turn their headlights on each other it would likely mean more video offerings at lower prices.



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