Market Overview

Redbox Instant Coming Late November/ Early December

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Redbox Instant, the Coinstar (NASDAQ: CSTR) Verizon (NYSE: VZ) joint venture will launch before the 2012 holiday season according to a Bloomberg report released Saturday.

The venture, which is 65 percent owned by Verizon, will build on Coinstar's current video rental service, Redbox, and move it into the streaming space on computers and mobile devices. Focused initially on new-release films, the service is slated to expand into TV shows and other movies soon after.

Following its launch, Verizon and Coinstar will move into the highly competitive market of streaming video, and move into the same segment as Neftlix (NASDAQ: NFLX) and Amazon (NASDAQ: AMZN). While no details on pricing or specific features of the service are available yet, it is known that Redbox Instant will pay content providers based on the number of subscribers in the same vein as cable providers. This differentiation will help the service break into the space by keeping startup costs low, but in the long-run it could become burdensome as the user base grows.

As a payment model, Redbox instant will hold onto its a-la-carte system, allowing users to purchase content individually. The service will also offer a monthly subscription for higher use customers.

The path to release for Redbox instant was opened up quite a bit Monday when TiVo (NASDAQ: TIVO) announced that it would be settling its DVR litigation against Verizon. The settlement, reportedly valued at $250.4 million will begin with an initial payment to TiVo of $100 million, followed by quarterly payments until 2018. The interesting component is that if the two companies enter a join venture, the proceeds gained by the venture become a credit towards the quarterly payments, therefore providing incentive for Verizon to do business with TiVo in the future.

This leads into another component of the TiVo press release, where the company revealed it is looking into supporting the Coinstar-Verizon joint venture. So it would seem the war between Verizon and TiVo has ended, and could soon be replaced by a strong partnership.

Verizon has displayed a steady year of growth so far, and the expansion into video streaming fits in with the company's mobile business. With an expansive line of tablets, smartphones and data cards for laptops, Verizon has the ability to preload the service onto millions of users' devices before purchase, greatly adding to the initial user base.

While Verizon has enjoyed a steady gain however, Coinstar has taken nearly a 20 percent hit since early July as investors worry the company is enter too competetive of a space. Following the company's third-quarter earnings miss in late July, shares fell sharply but recovered for a short time after when a rumor of an Amazon takeover reached investors.

Shares of Coinstar traded up slightly Tuesday, rising 0.37 percent to $45.84.

Posted-In: Bloomberg Redbox Redbox InstantNews Offerings Events Movers Tech

 

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