Verizon's instant movie failure
The Redbox venture is entering an already crowded space.
By 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.
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