Redbox Instant Is No Match for Netflix

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Redbox Instant hasn't exactly lived up to its name so far. The combination DVD and streaming video service, jointly run by Coinstar (NASDAQ: OUTR  ) and Verizon (NYSE: VZ  ) , took forever to get into customers' hands. But after months of limited beta testing and a couple of launch delays, the wait for Instant is finally over.

And now that it's taking on paying subscribers, the 30 million member question is: Just how well does the Redbox service stack up against Netflix's (NASDAQ: NFLX  ) offering? The short answer is: not well.

The good
Cheaper price:
On the plus side, Redbox Instant has Netflix beat on price. For $8 a month, users can stream to their hearts' content while enjoying four nights of rentals from one of their local DVD kiosks. You only get unlimited streaming from Netflix at that monthly price, with DVDs costing extra.

Video games: Redbox users also get a gaming bonus. They can spend their free DVD rentals on any of a host of popular console games that can be checked out from the company's thousands of kiosks. Netflix doesn't play in the video game market at all.

But that's about where the close comparisons stop. Beyond video games and price, the two offerings are actually worlds apart.

The bad
Limited content
: Redbox Instant's selection just doesn't compare. It has less than 5,000 titles available for streaming now. And those are mostly from the company's content deal with Epix. Of course, Netflix and (NASDAQ: AMZN  ) both have deals with Epix too, along with dozens of other content owners.

By Netflix's count last quarter, Redbox Instant carried just 12 of Netflix's top 200 streaming titles. And those 12 movies were all available on Amazon's Prime service as well. So Redbox streamers are getting a small subset of what Netflix and Amazon already offer.

No TV shows: And Redbox Instant is a movies-only service. That's fine for movie lovers, but it leaves a huge amount of viewing possibilities on the table. We know that TV shows account for the majority of Netflix's usage. Television series were good for two-thirds of all of the company's streaming in the third quarter of last year.

By focusing on movies, Redbox Instant gains some brand clarity. But it loses any realistic shot at becoming the daily entertainment destination that Netflix is for many of its subscribers. How many nights a week do you have time to watch an entire movie?

Limited devices: Redbox is also hampered by a small selection of devices that its customers can stream content from. It's now available on Microsoft's Xbox console, iOS and Android devices, and a handful of Samsung TVs. But that's a far cry from the thousands of Internet connected devices that Netflix boasts, including all major consoles and nearly every smart TV and DVD player that's been sold over the past few years.

No original content: But probably the biggest difference going forward will be in the original content arena. Netflix and Amazon are both barreling down that path, hoping to extend the moats around their streaming brands with compelling titles that are exclusive to their services. Netflix just released House of Cards and is prepping a handful of other original shows for later this year. Amazon is piloting a dozen of its own exclusive titles.

But Coinstar and Verizon are aiming to keep costs down for the Redbox Instant service, which makes expensive original content deals unlikely. Sure, Coinstar just took out $400 million in new debt that could be used for scooping up more content rights. However, the automated retailer has other projects to fund that are much closer to its competitive strengths.

Bottom line
The Redbox Instant service could make for a compelling value, particularly for customers interested in movies and video games. But it isn't a substitute for the type of wide-selection, TV dominated streaming service that Netflix sells to its subscribers.

Coinstar and Verizon are being cautious on costs so that spending doesn't risk torpedoing either company's balance sheet. The flip side to that caution is a service that aims at just a small subset of the online video market. There's room for Redbox Instant to turn a profit here, but don't expect it to poach many of Netflix's 30 million streamers.

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Read/Post Comments (13) | Recommend This Article (8)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On March 16, 2013, at 3:37 PM, segarolow wrote:

    How do they beat Netflix on price? I am only paying $7.99 a month for the online set up.

    All I can watch.24/7.. 365..

    And they have a Ton of TV shows, Movies ect..

    Also Netflix has CC Closed Caption on 80% of what they have. And will have it on everything by 2014.

    All the talk and build up. And how good it was going to be. Ha!

    I got a free 30 day deal with RedBox.. And dropped it like a bad habit!

    I use RedBox now and then. But the online deal is a flop!

    Just my two bits worth..

  • Report this Comment On March 16, 2013, at 3:40 PM, vireoman wrote:

    Take a chill pill, DK. This low-cost service just started, for goodness sake. CSTR owns just 35% of Redbox Instant, and, if nothing else, the service has the potential to drive more customers to its high-margin Redbox kiosks. I'm a shareholder in CSTR and I much prefer the odds of its share-price increasing further over the next year to that of your beloved NFLX.

  • Report this Comment On March 16, 2013, at 5:53 PM, lovesamystery32 wrote:

    I tried the free trial of Redbox Instant and quickly dropped it. It only works with certain Blu-ray players, no Roku boxes, and no PS3. We have a PS3 and therefore the lack of compatibility made it pointless. I did browse through the movies and I only found one title that Netflix didn't already have, so it wasn't worth the price for us.

  • Report this Comment On March 17, 2013, at 5:24 AM, leeping1 wrote:

    Interesting points. I would think much of it is just personal thoughts. VZ is about a 140 billion dollar company - and the assumption here is that money is tight for content, huh?. Which in itself is off base because they are not buying content, it is on a per subscriber basis with the studios.

    Personally I rent 2 to 3 dvds a month (cost $3.75). Now that I get them free with my $8 service, I am virtually only paying $4.25 for my streaming.

    cstr instant seems great for us that don't watch TV and don't want our kids vegging out for hours a day.

  • Report this Comment On March 17, 2013, at 8:59 AM, shakeyabootie wrote:

    i had the redbox instant for 2 mos, thought id give it a shot and love the idea of the free movie credits. the credits are the only reason i went into month 2. the selection of movies are horrible found only one movie i wanted to watch and it was a sequel. the 1st part was offered so i just eneded up watching them both on amazon. waste of money. but will considering going back when they get more movies.

  • Report this Comment On March 17, 2013, at 5:54 PM, TMFSigma wrote:

    @vireoman - I like CSTR's business and think it has a lot of room to grow in the automated retail space. I just don't see the Redbox service challenging NFLX.

    @leeping1 - that's exactly right, Redbox instant is buying content on a per-subscriber basis, which is not the way NFLX or other broadcasters do it. That limits costs dramatically, but it also takes a lot of options off the table in terms of new and/or original stuff.


  • Report this Comment On March 17, 2013, at 10:27 PM, rdub76 wrote:

    I think NFLX is and will continue to be the dominant player in the future of entertainment delivery. I've had NFLX both DVD and streaming service for over two years. I've had no complaints so far. The fact that they are adding content and creating their own original series speaks a lot. 'House of Cards' is an excellent series. If they can make original content profitable they could truly reinvent home entertainment. Great shows with no commercials? Yes please!

  • Report this Comment On March 18, 2013, at 11:23 AM, Easttexas9 wrote:

    If Redbox improves their delivery and offers new release movies a-la-carte for about 3 bucks, I'm in. Don't need old TV series, old movies or more NEW TV.

  • Report this Comment On March 18, 2013, at 11:57 AM, Franky46 wrote:

    I'll admit that I have never used a RedBox and will probably never try the Instant service because having to go somewhere to return a DVD by a certain time just seems like such an old concept to me it adds no value. But what I think needs to be discussed more is Verizon's role in this partnership. While they do have a lot of $$ to invest, I don't ever see them honestly trying to build the unlimited movie library and doubt they will ever want to add TV shows. This is because Verizon's main income still comes from cable TV subscriptions and if they allow you to get that content elsewhere for cheaper they are just hurting themselves. This is what I believe will be the true downfall of RedBox Instant, Verizon's resistance to hurting their other products.

  • Report this Comment On March 18, 2013, at 6:42 PM, TMFSigma wrote:

    Yeah @franky46, it's hard to succeed in this market when you have divided loyalties. Just look at Hulu. It can't go too hard after subs without angering the content guys that pay its bills. Not a good setup, long term.

  • Report this Comment On June 25, 2013, at 3:33 AM, seq101 wrote:

    I think the above posters have covered most concerns. Many dont realise that redbox/coinstar is in bed with Hollywood, such as Paramount Pictures,and their direct connection to the cable network is mostly a means to try to slowly squeeze out netflix.

    The cable companies at least the ones that are owned by the largest companies have been trying to control netflix pricing for several years now.

    They even wen't as far as to say that netflix wasn't charging a fair market value for their service, and thus under Starz decided to jack up their renewal rate to $300million, one in which netflix said no way.

    To be honest I don't blame netflix one bit, for one those cable companies and hollywood tried to make the cost to me as the consumer far higher, by over capitalising their assets, aka movie content.

    The fact is many people I included have either already wen't to the movies to see a movie,that is being made available on streaming services, or I already own a purchased copy of the movie, but find it far easier to watch on netflix instead of digging it out of my home library, loading and unloading the disc and putting it away.

    So for me $8.00 a month is worth it, I don't have to move from my easy chair, and that's good to finally have some me time that isn't wasted, no I'm not lazy, but to me the value is there.

    Left up to communications companies they will try to continue to over capitalise on their assets, that includes movie content I have already watched, or are several decades old.

    Don't get me wrong, I love classic movies, but c-mon those classic movies many were made with costs of just a few hundred bucks to a few thousand, and they are still wanting to get new premium prices for such content, is crazy, although the new movies are mostly re-vamped older movies, updated graphics and annoying surround sound, that has to be turned down when the shooting starts, and turned back up in order to hear the actors. I think redbox needs to stay with kiosk rentals.

    I started my subscription with netflix, and blockbuster at the same time, 3 months later I canceled blockbuster and stuck with netflix for about 5 years now.

    Two weeks of waiting I have finally been able to rent the three dvd's redbox has advertised as being made available.

    One evening I drove to 4 different redbox locations and not a single one of their advertised movies (about 10 titles) were available, to me that said lier lier, they wasted my time knowing full well none of their machines had any of the titles stocked yet.

    Nevertheless I rented three dvd's when they finally became available, of course when asked if I'd like to try thier streaming service I said "nah" I'm happy with netflix at this time.

    And I skipped the 4th dvd for only $0.50 no one, and I mean no one is going to nickle and penny me.

  • Report this Comment On June 25, 2013, at 3:41 AM, seq101 wrote:

    Just wanted to add one other content. coinstar has green painted machines, Verizon mostly black with some red.

    I find it a laughable that they choose to use red as their primary color, and white for the redbox logo, to me it appears that redbox was created in the image of netflix.

    I mean why choose red? bright colors? perhaps, the fact is Yellow would have been even better, manufacturers have known this for years, the vast majority of packaging in groceries for example will have yellow because it grabs attention.

  • Report this Comment On January 12, 2014, at 12:51 AM, WOWJUSTWOW wrote:

    Seq101 WOW! Hope you didn't have to get out of your easy chair or cut into your "me time" to write that crap. God forbid that you take 4 mins out of your 2-3 hrs of your "me time" to deal with a disk. Truly what has the world come to? It's crap like this that makes me want to just kill I cute fluffy puppy just to see if it will make people stop and say "WTF". Well maybe not a puppy but a kitten or at lest a small child.

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