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Can Redbox Instant Kill Netflix?

Verizon (NYSE: VZ  ) and Coinstar (NASDAQ: OUTR  ) are putting the finishing touches on their long-awaited digital movie service. The product, known as Redbox Instant, is supposed to be a Netflix (NASDAQ: NFLX  ) killer of the highest order. At least, that's the conclusion many observers are drawing from the preliminary details Coinstar and Verizon just published.

But you know what? I think we've seen this Netflix attack before, and it didn't work out all that well last time. Six years ago, it was called Blockbuster Total Access.

You don't buy that comparison? Let's compare and contrast the video services from different eras:

Total Access

Redbox Instant

Sell subscription services for less than Netflix.

Sell subscription services for less than Netflix.

Include extras like faster DVD shipping and free rentals when you return videos in-store.

Include extras like free DVD rentals with your streaming plan.

Offer the subscription plan as an alternative to other choices, like renting movies one by one or buying popcorn at the counter.

Besides subscription services, you can also rent or buy movies piecemeal or reserve discs to pick up at the nearest Redbox kiosk.

Honestly, the only serious difference between this service and the defunct Total Access is that Blockbuster was slinging physical media while Verizon and Coinstar peddle digital movies. It is a crucial difference indeed -- the sudden surge of free rentals often left Blockbuster without inventory to serve its regular customers, hastening the demise of Total Access and the company itself. That logistical issue doesn't exist in the digital world, so Redbox Instant won't collapse under its own weight.

To beat Netflix at its own game, Redbox Instant needs to find its own identity. At launch, the library appears to be stocked with back-catalog leftovers plus fresher material from cable channel Epix. The Epix tie-in could have been interesting if Redbox were allowed to stream new releases while they're still super-hot, given that Netflix and others have to wait three months after titles like The Hunger Games and The Avengers premiere on premium cable. But Redbox is stuck with the same delayed release window, so there goes that potential selling point.

In short, it's a pretty vanilla pay-per-view service like the ones offered by Dell (UNKNOWN: DELL.DL  ) , K-Mart, and Vizio, coupled with a low-octane version of the Netflix service and the instant gratification of Redbox kiosk rentals. Or you can see it as a handful of prepaid monthly Redbox rentals with a low-cost streaming service thrown in for a few bucks more.

Will consumers feel that this combination is an unbeatable mix of value and convenience, or will they be confused by the jumble of options and turn elsewhere? Only time will tell, but I don't think it's much of a Netflix killer.

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Read/Post Comments (4) | Recommend This Article (4)

Comments from our Foolish Readers

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  • Report this Comment On December 13, 2012, at 9:28 PM, never2dull4u wrote:

    Redbox will kill Redbox. There's no other way.

    What Redbox has to offer is no different than what Bustblocker has to offer....

    DIS+NFLX= Death of Hulu. One less competitor for NFLX.

    Rinse and repeat.

  • Report this Comment On December 13, 2012, at 10:00 PM, AceInMySleeve wrote:

    you need to be careful about a few things. Total Access was doing quite well actually, the parent company just ran out of money and threw out a good CEO. Hastings told the chief manager of that program afterwards that they had Netflix in checkmate. A few quarters they grew in absolute subs faster than Netflix.

    The differences are much larger now, and they are in Netflix's favor. TA and Netflix had the same DVDs, and the ability to drop DVDs off at the store was a huge plus, but streaming selection is not symmetric and the redbox component doesn't really complement streaming in any obvious way similar to bringing envelopes to a store.

  • Report this Comment On December 14, 2012, at 9:24 AM, jb757 wrote:

    Why do you ignore the obvious? Netflix has a massive catalog of over 100,000 American and foreign movies and TV shows. Redbox has only some thousands of titles, 200-300 in each kiosk. It is a good business because they offer some more recent movies. And even some Netflix users may take advantage of it. But they don't have the overall power to take down Netflix.

  • Report this Comment On December 17, 2012, at 7:51 PM, theown3r wrote:

    While you compare the similarities of Total Access and RedBox Instant you cleverly left out the value proposition and pricing.

    Until you compare the pricing and the value, your article remains biased and misleading.

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