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Redbox-Verizon Streaming to Challenge Netflix by Year-End

Coinstar Inc. (CSTR)’s Redbox and Verizon Communications Inc. (VZ), providing details of their challenge to Netflix Inc. (NFLX), will offer subscription streaming, movie sales and rentals by Christmas, along with DVDs from the local kiosk.

Redbox Instant by Verizon, being tested in the homes of about 500 Verizon employees, initially will focus solely on newer movies that have been available for sale and rental, Eric Bruno, Verizon’s vice president of strategy and planning for consumer and mass business markets, said yesterday in an interview.

The venture, 65 percent owned by Verizon, will battle Netflix and Amazon.com Inc. (AMZN) for the growing number of consumers who watch movies and television shows online and on devices like Apple Inc.’s iPhone. The U.S. market for subscription streaming rose fivefold to $1.1 billion in the first half of 2012 from a year earlier, according to data from the Hollywood studio-backed Digital Entertainment Group.

Verizon and Bellevue, Washington-based Coinstar are focused on a streaming network “that can stand on its own against Netflix, against Amazon,” Bruno said.

Netflix, based in Los Gatos, California, had 24 million U.S. customers of its $7.99 a month subscription streaming service as of June 30, by far the largest competitor. Amazon, the Seattle-based online retailer, offers free two-day shipping and access to 25,000 movies and TV shows for $79 a year. It doesn’t disclose its subscribers.

Online Rentals

Redbox Instant was announced earlier this year. In addition to a monthly subscription and an allotment of DVDs from Coinstar’s almost 40,000 kiosks, it will offer a la carte movie rentals online and purchases for download, Bruno said.

Customers will be able to download titles to mobile devices, game consoles and set-top boxes through an application that will be available at Apple Inc. (AAPL)’s app store, Google Inc. (GOOG)’s Android store and other marketplaces, he said.

While there’s no specific date, the venture is targeting a start to the service between late November and mid-December, after a short period of initial public testing, Bruno said. Coinstar has previously said that the service is targeted to start before year-end.

Coinstar and Verizon will pay content providers based on the number of subscribers, similar to traditional cable-TV systems, rather than a set payment, Bruno said. Netflix has paid a set amount for streaming rights to movies over a specific period of time, a model that increases the pressure to attract new subscribers.

Redbox Instant hasn’t announced pricing. In August, Coinstar Chief Executive Officer Paul Davis said the venture will focus on “value” pricing.

Coinstar rose 1.3 percent $46.52 yesterday in New York. It has gained 1.9 percent this year. Verizon, based in New York, climbed 0.3 percent to $45.64 and has added 14 percent in 2012.

To contact the reporters on this story: Cliff Edwards in San Francisco at cedwards28@bloomberg.net; Michael White in Los Angeles at mwhite8@bloomberg.net

To contact the editor responsible for this story: Anthony Palazzo at apalazzo@bloomberg.net

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