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Verizon, Coinstar forge DVD movie alliance

by Richard Morgan | Published February 6, 2012 at 3:39 PM

Verizon Communications Inc. and Coinstar Inc. didn't take questions Monday, Feb. 6, after a press conference introduced their joint venture to offer subscribers video products in both a physical DVD format and on demand through streaming and download services. But the one question that didn't need answering is whether the field once dominated by Netflix Inc. is getting more crowded by the day.

The Verizon-Coinstar JV, slated to launch in the second half of this year, will essentially combine and expand markets for Verizon's FiOS pay-television services and the self-service kiosks of DVD renter Redbox Automated Retail LLC. As such, it will join a field where Amazon Inc., Apple Inc., Dish Network Corp.'s Blockbuster LLC, Hulu Inc. and Google Inc.'s YouTube LLC are in one way or another already considered competitors to over-the-top media pioneer Netflix.

Verizon, based in New York, will own 65% of the as-yet unnamed JV. Redbox, an Oakbrook Terrace, Ill., subsidiary of Bellevue, Wash.-based Coinstar, will own the remainder.

A Form 8-K filed Monday stated these ownership interests may vary over time, depending on future capital contributions from each participant. However, by contributing an initial $14 million in cash for its 35% stake, Redbox has the right to appoint two of the JV's five managers. Verizon will appoint the remaining three.

The filing also acknowledged that, through licensing agreements, the JV also has the right to use both the Redbox and Verizon trademarks. Yet it further recognized that it was just a "summary" -- much as the press conference about the JV was little more than a headline -- to be superseded by information contained in Coinstar's regulatory filing for the first quarter of 2012.

Verizon, with revenue of $111 billion last year, is a leader in delivering broadband, wireline and wireless communication services; Redbox's video and game discs are available nationwide at more than 35,400 kiosks, and it has rented more than 1.5 billion of them.

"By offering instantly available online and mobile content with immediate access to physical media through rental kiosks, Verizon and Redbox will be uniquely positioned to deliver the best of both worlds -- digital and physical -- to consumers across the country," the companies said in a statement about their JV.

Marci Ryvicker, an analyst at Wells Fargo Securities LLC, noted there had been speculation about such a JV for several months. "And while there is still a host of uncertainty with regard to the price point and the specific content offering," she wrote in an update Monday, "we view this as a positive for content providers and 'noise' for cable."

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