Bloomberg News

Redbox Instant CEO Sees 35 Million Potential Users

January 10, 2013

Redbox Instant, the online-video service owned by Verizon Communications Inc. (VZ:US) and Coinstar Inc. (CSTR:US), has signed 10,000 users to its public test and sees the potential for 35 million customers, based on research.

The service, which combines streaming with Redbox kiosk discs, focuses on movies and intends to draw customers from competitors that don’t offer DVD rentals, Chief Executive Officer Shawn Strickland said in an interview today at the International Consumer Electronics Show in Las Vegas.

“We’re not the Netflix killer,” Strickland said after a presentation to reporters. “We’re focused on movies. DVDs are our core, that’s a core differentiator.”

Redbox Instant, at $8 to $9 a month, is counting on price and convenience to attract customers. Users will get unlimited streaming plus four DVDs a month from kiosks. The service also offers on-demand rentals and digital sales of newer titles. Redbox Instant has 4,200 movies in its streaming library and 2,500 available on VOD.

Films from Lions Gate (LGF:US), Paramount Pictures, Warner Bros., Universal Pictures, Sony Pictures and Relativity Media will be available for purchase and on-demand rental.

Netflix had 27.5 million U.S. streaming and mail-order DVD subscribers as of Sept. 30. The company, based in Los Gatos, California, charges $7.99 a month for unlimited streaming and the same amount for DVDs sent by mail.

Considering TV

Coinstar’s Redbox unit operates about 42,000 kiosks.

Redbox Instant may add television shows if the company can offer programs that aren’t available elsewhere, Strickland said.

“Ultimately the strategy for us in the content space has to be bringing people in, and TV is part of that,” Strickland said.

Redbox Instant’s business model differs from Netflix and other streaming services in that it compensates studios based on the number of subscribers instead of making a large upfront payment.

Coinstar, based in Bellevue, Washington, fell 1 percent to $48.59 at the close in New York and have gained 13 percent in the past 12 months. Verizon declined 0.2 percent to $43. Netflix fell 1.3 percent to $95.91. The shares have lost 2.3 percent in the past year.

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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