Verizon's instant movie failure

The Redbox venture is entering an already crowded space.

By 247 Wall St. Dec 13, 2012 11:40AM

CorbisBy Douglas McIntyre

 

Redbox, the DVD rental company owned by Coinstar (CSTR), has begun to promote a streaming movie service on its homepage: "Everything you love about Redbox -- Plus unlimited movies, instantly!" Redbox plans to launch the service with Verizon Communications (VZ) on the carrier's Internet network.

 

Problem is, the so-called Redbox Instant by Verizon is behind a very long line of similar services that have, among them, a high penetration of the U.S. residential market. That will make the failure of the new venture almost certain.

 

Companies have forever wanted to enter businesses they believe will be successful because similar existing businesses already are. The pull to do this can be almost irresistible. Why give up on a market that is well-established and already accepted by consumers? The answer is that a market has room for only so many competitors, and the last ones in have huge disadvantages.

 

The most obvious success in the streaming video business is Netflix (NFLX), an online DVD business with a video streaming service that became phenomenally successful. But even Netflix has run into a wall of trouble as programming costs have risen and subscriber growth has slowed.


Amazon.com (AMZN) has become a powerful Netflix rival with its Amazon Prime Instant Video service. The product is tethered to Amazon's free shipping and e-book subscription products. By dint of its size and number of customers, Amazon has a substantial edge.


And Apple (AAPL) stalks the sector with its Apple TV product. Even the world's largest retailer, Wal-Mart (WMT) has a streaming product called VUDU, which it offers through its widely trafficked website.

 

The consumer can hardly tell the difference between a video streaming service and video-on-demand over cable or satellite. While Redbox may hope consumers can discriminate among the many offerings, they often cannot. That takes away any advantage its product with Verizon might have. Existing Redbox customers may become subscribers to the new service -- if they do not already have subscriptions to the others that are available.

 

The Redbox joint venture with Verizon does not stand a chance. The industry is already crawling with solid competition.

 

More from 24/7 Wall St.

3Comments
Dec 13, 2012 12:53PM
avatar
The writer doesn't realize that they'll create an app for tablets and Verizon phones, then bill it Verizon customer TV/phone bills.   

 They'll also add it as a service to FiOs and set top cable boxes.    Where it will download to your DVR and be ready when you get home.

They'll make a killing as an up sell service where Netflix and Amazon have to get the customer to come first and rely on it.    

The writer doesn't realize that Apple doesn't provide any content and their's no mention of direct TV or Hulu.
Dec 13, 2012 12:44PM
avatar
I happen to disagree, respectfully.  The Verizon name coupled with additional offerings, widgets and promotions would definitely catch my attention and would make me lean towards Verizon as they seem to have a knack of everything they do, they seem to do it well. I would certainly entertain switching. To call it a bust at this stage of the game borders on ignorance and irresponsibility
Dec 13, 2012 11:49AM
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