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Verizon and Coinstar announced a joint venture today (65% Verizon/35% Coinstar) to launch a national video service with physical and digital delivery. While few details are currently available, it will be primarily subscription based. We suspect the business model will mirror that which Netflix abandoned – unlimited streaming access to long-tail content with a few Redbox rentals per month. This type of service will compete with Netflix as well as Dish/Blockbuster, Amazon Prime, etc. We expect each partner will have the opportunity to cross-sell its products; Coinstar/Redbox will gain mindshare among those consumers who have taken to streaming video services and Verizon will gain an avenue for growing its video footprint nationally – an important step given the limitation of its FiOS expansion. With its content relationships, Verizon may be able to help Redbox customers access newer titles (e.g. before the 28 day window delay for some new releases). Regardless, it can help solve two key limitations of Redbox – first, its inability to deliver long tail content, and second, its inability to deliver instant gratification.
It is unclear at this time how consumers will interface with the service. Just how integrated will Redbox and Verizon (either Verizon Mobile or Verizon FiOS) be? If the rental systems are well integrated then a user could ostensibly reserve a video at a Redbox kiosk via Verizon’s VOD storefront on FiOS or on a mobile phone. The joint venture is expected to gain access (through Verizon’s Digital Media Services group, VDMS) to some of Verizon’s great device support coming from both mobile and FiOS’s FlexView platforms – including support for XBOX, Apple’s iOS devices, and Android devices.

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