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Verizon CFO: We're 'Very Close' to Redbox Launch — And SVOD

18 Oct, 2012 By: Erik Gruenwedel, Chris Tribbey

Telco also says it plans to bow a separate digital content — including movies — delivery platform in 2013, which undoubtedly includes SVOD

Verizon Communications is “very close” to launching its much-anticipated (but little known) digital rental joint venture with Redbox, including rollout sometime this quarter, CFO Fran Shammo said during the telecommunications company’s Oct. 18 third-quarter fiscal call with analysts.

Shammo said the launch of Redbox Instant by Verizon would include backend support from Verizon Digital Media Services [VDMS], which includes Verizon Content Services — a turnkey platform designed to give content owners an easier means of distributing programming to digital consumers on mobile devices, including smartphones, tablets, laptops and PCs.

Redbox Instant by Verizon aims to integrate the kiosk vendor’s formidable disc rental service with a digital strategy. Further details and pricing of this platform remain unclear.

“We're very close to launching here in the fourth quarter of Redbox,” Shammo said. “[VDMS] plays a very critical role in the content delivery with that joint venture with Redbox, and, again I think moving in to 2013 the business case that we have with with Redbox will improve our top line and contribute to the profitability of the overall wireline segment.”

Eric Wold, analyst with B. Riley & Co. in Los Angeles, said consumer demand for Redbox Instant by Verizon should be strong, “given that this was a core driver of Netflix’s growth for years before they separated the two plans and effectively raised the price by 60%.”

In a note to investors, Wold speculated that Redbox Instant by Verizon’s core consumer offering could offer unlimited streaming with two to three physical disc rentals a month for between $8 and $10.

Separately, Shammo said Verizon is working with content owners and movie studios to rollout VDMS to consumers in 2013 — a platform that likely would include transactional video-on-demand and, more importantly, subscription VOD targeting Netflix, Hulu Plus and Amazon Prime Instant Video, among others.

“We've been dealing with, what we call a number of chartered customers which includes many content providers and movie houses in helping us to customize this package and get this thing to market,” Shammo said. “We anticipate that we will come to market in 2013. I won't be specific on that date at this point in time but we believe we have a very viable product to come to market place that will significantly change the way the content is, if you will, ‘packaged and picked and shipped.’ I think that will start to contribute through some of the wireline top growth and help to improve the margin overall.”

Meanwhile, Verizon said its FiOS fiber-optic TV service added 119,000 net video subscribers in the quarter, bringing its membership base to 4.6 million, or 33% market penetration. Overall, Verizon's wireline business, which includes FiOS, saw a 1.1% decline in pre-tax operating income of $2.1 billion on revenue of $9.9 billion.

Redbox parent Coinstar reports financial results Oct. 25. B. Riley & Co.’s Wold said Redbox’s third-quarter same-kiosk revenue would likely be down due to a combination of a weak DVD release slate and the summer Olympics keeping people away from DVD kiosks.

About the Author: Erik Gruenwedel

About the Author: Chris Tribbey

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