Coinstar/Redbox

9/1/10 - Redbox, a division of Coinstar that offers movie rentals via DVD kiosks, recently announced plans to launch an online streaming service in competition with Netflix, which is well established in the streaming video market.

Can Redbox challenge Netflix with its online move? In the short term, probably not. Redbox could theoretically become a serious competitor to Netflix by adding a streaming option to its popular $1 a day DVD rental service, but Redbox lags far behind Netflix in term of its movie library and device penetration.

Netflix has created a formidable DVD rental franchise in the U.S., with 20 million subscribers paying a monthly fee of about $12 to borrow physical DVDs and download streaming versions of select films and TV shows. Netflix’s total subscriber count is expected to double within three years.

Netflix’s online library includes some 20,000 titles that it acquired over several years of negotiation with content providers. By contrast, Redbox currently maintains about 200 titles in each of its 24,000 DVD dispensers.

Redbox primarily offers newer titles, making the company’s $1 rental charge a great deal for customers. but to succeed in the streaming video market Redbox will need to vastly increase the size of its library.

Several analysts have suggested that Redbox could partner with Sonic Solutions, a company that develops and manufactures digital video publishing systems. Sonic offers both streaming technology and a library of 20,000 licensed movie titles. A Sonic partnership could allow Redbox to sidestep lengthy negotiations with movie studios over streaming rights. But this raises another issue.

Sonic’s technology works on far fewer devices than Netflix’s system. Although Sonic’s Roxio service is expanding, Sonic announced that Roxio would be available on 3 million devices by June 2010.

By contrast, Netflix’s game console penetration alone allows it to reach about 50 million devices in the U.S. market. Additionally, Roxio’s platform does not support Apple’s Mac OS, which further limits its reach.
 

6/15/10 – Viacom’s Paramount Home Entertainment and Redbox said that they've agreed to extend Redbox's revenue-sharing deal with the studio, which allows Redbox to offer Paramount DVD and Blu-ray discs for rental the same day they become available for sale. Paramount said it renewed the option on its pact with Redbox (owned by Coinstar) following a 10-month review of how well its DVDs were selling in the marketplace.

The deal represents a contrast to Redbox's recent agreements with Warner Bros., Universal and Twentieth Century-Fox. Each of those studios requires Redbox to wait 28 days after their DVDs go on sale to begin rentals.

Redbox owns thousands of kiosks across the country where consumers can rent new-release titles for $1 each. Several studios became concerned that the kiosks have cannibalized DVD sales, which have been on the decline in recent years.