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Redbox Instant Details Leaked Online

30 Nov, 2012 By: Erik Gruenwedel, Chris Tribbey

The physical and digital platform, which reportedly could launch by Dec. 17, would offer streaming plan starting at $6 monthly, with discs priced at $8

Redbox’s much-anticipated subscription video-on-demand and kiosk rental service joint venture with Verizon Wireless could launch by Dec. 17, with monthly service priced from $6 for streaming only and $8 with four rental discs per month, according to beta tests leaked online (and since taken down).

Redbox has said it would launch the platform, which is intended to compete with Netflix and Blockbuster @Home, by the end of the year. Netflix unlimited streaming option costs $7.99 a month, while the disc-only option is also $7.99. Hybrid plans cost $15.99 a month.

The SVOD-only option would offer unlimited access to digital titles such as Rango, Iron Man 2, Killers and Thor, according to , which first reported the details.

The $8 monthly plan would enable subs to get four disc rentals at Redbox kiosks, which can be reserved online. Redbox Instant will also offer electronic and transactional VOD options, with digital rentals starting at 99 cents for catalog titles.

The service will be accessible on iOS and Android devices, Xbox 360 and select connected Samsung and Blu-ray Disc players. It wasn’t immediately clear if Redbox Instant is available on PlayStation 3, Roku, Wii or other media players.

"We’re excited about the upcoming launch of Redbox Instant by Verizon, and we look forward to the joint veneture [and] sharing the full details of the service soon," Redbox said in a statement.

John Kraft, analyst with D.A. Davidson & Co., in Lake Oswego, Oregon, said the leaked data suggests a SVOD and disc rental service that could trump Netflix and other SVOD services. Interestingly, Kraft said Redbox will get paid directly for disc rental plans while digital content acquisition costs would be based on the number of subscribers and not a flat fee, which is what Netflix and Amazon pay.

While such a license agreement would make sense for transactional VOD, it would appear at odds with media company CEOs Les Moonves (CBS Corp.) and Jeff Bewkes (Time Warner), among others, who have publicly stipulated that SVOD platforms pay upfront for content, rather than build their services on the backs of third-party content.

Kraft said the license arrangement would have "significant implications" regarding initial content costs as well as profitability. He said the joint venture would have the opportunity to acquire significantly more content at a much lower initial cost.

"This should create a win-win joint marketing relationship with the studios," Kraft wrote in a Nov. 30 note. "We remain optimistic regarding several important catalysts: Warner’s just-signed contract with Redbox (effective January 1, 2013), which ends all of the company’s logistically complicating “work around”; the launch of Rubi, parent Coinstar’s coffee kiosk initiative; as well as the rollout of the acquired Blockbuster Express locations."

Eric Wold, analyst with B. Riley & Co. in Los Angeles, said notwithstanding the quality of content offered at launch, Redbox Instant suggests a compelling alternative to Netflix and other SVOD services given the significant lower pricing. 

"We could see some strong consumer uptake for this offering given that a combo subscription plan was the major growth vehicle for Netflix for years," Wold wrote in an email. "In my opinion, if this information proves correct, this could be an attractive contribution to Coinstar over the years, especially with the potential for a fairly quick ramp to profitability — but also an increased risk for Netflix (even more so than we have recently assumed)."

Analyst Michael Pachter with Wedbush Securities in Los Angeles said the leaked data revealed Redbox Instant has access to Epix content (i.e. Lionsgate and Paramount Pictures), which he said would cost at least $80 million in license fees and about 1 million subscribers to cover the cost.

"I am not optimistic that they will ever be profitable at this level," Pachter said in an email. He added that should Redbox Instant be bundled with FiOS TV, it could likely attract 2 million FiOS households in short order, helping to defray some of the content costs.


About the Author: Erik Gruenwedel

About the Author: Chris Tribbey

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