Redbox and Verizon Challenge Netflix: Good luck, you’ll need it!

photo: michperu on flickr

In what might be the biggest cord cutter news of 2012 Verizon has teamed up with Redbox to enter the video streaming market. And to make it more interesting the Redbox deal is a lot cheaper. Compare:

Netflix Instant: $7.99/mo
Neftflix DVD’s:   $7.99/mo
Netflix Total: $15.98/mo

Redbox Streaming: $6.00/mo
Redbox  Streaming + DVD’s(4): $8.00/mo
Redbox Total: $8.00/mo 

Very competitive! You’d save about $8/mo on the combined streaming + DVD package. But what could go wrong?

For one it’s not so easy to acquire thousands of movies overnight and start streaming them.  Even Netflix Instant contains but  a fraction of what the DVD library offers. Search for any relatively recent hit movie on Netflix and odds are it is only in the DVD plan. The cost of content and licensing has been one of Netflix’ biggest challenges.  Netflix recently bid $350 for exclusive rights to Disney movies, so don’t expect to see those from Redbox.

Another challenge for Redbox is distribution. Today Netflix is built into every game console, smart TV, and a variety of set tops. Redbox will likely have to launch without that many choices. And I wonder if the Netflix Roku relationship would be strained if Roku simply added a Redbox channel.

What about DVD distribution? The Redbox model  seems much less attractive. It involves driving to your local shopping mall to find the nearest kiosk. I like that concept for the occasional movie impulse rental. But as a subscription package it brings back old memories of Hollywood and Blockbuster stores. If Redbox charges late fees on this plan forget about it.

There is  a paradigm in marketing that being first is more important than being the best which I think will hold true in this case.  Because of its early start, Netflix has had the benefit of working out many of the problems of operating a  successful streaming business.  I do hope that the Redbox plan brings some competition to the market, but I’m not expecting it to take a huge piece.

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