Verizon and RedBox have teamed up to create project Zoetrope, a subscription-based streaming service to rival Netflix.
In early December, Verizon was in talks with multiple companies to try and create a dream team to take a chunk out of Netflix’s business. Early in the discussion, it was rumored that RedBox was the front runner to partner up with Verizon to make a subscription-based video service to rival Netflix. This morning the announcement was made that it is now official.
Originally, the rumor mill speculated that the Verizon and RedBox project (nicknamed Zoetrope) would be about streaming movies and TV and that the tentative release would be sometime in May of this year. The plan of attack was releasing the service on all devices available, including iOS, Android, Google TV, Xbox, Roku, other streaming devices, and browsers.
Project Zoetrope was also prepared to offer standard or high definition downloads and the ability to store downloads locally on tablets and smartphones. The payment plan was to be based entirely on credits within a tiered pricing system. For example, for $6 a month, a customer would get 6 credits which will allow the customer to download a certain number of TV shows or movies. At the time the news broke, Verizon and RedBox were also planning on offering physical DVD rentals as part of at least one payment tier.
Earlier this morning, Coinstar (owner of RedBox) and Verizon announced that Project Zoetrope will indeed become a reality. The release date will be later than expected – instead of late May or early April, the press release stated that it will happen sometime in the second half of 2012. Without a doubt, the goal of the endeavor is to take a piece of Netflix’s pie.
The announcement was sparse in details, but what is for certain is that RedBox will keep their 35,000+ kiosks in operation to team up with the subscription service project. Officially, the companies announced that this would be a “video on demand streaming and download service.” The announcement did not confirm which platforms the project will be available on, but to make the most amount of money, in will undoubtedly hit the big names like iOS, Android, and Xbox, in addition to others.
One clear advantage this service already has over Netflix is the ease of getting a movie offered on disc only. If you want to watch a movie right then but it’s not available through Netflix Play Instant then you’re stuck waiting by your mailbox for a few days. Verizon and RedBox’s plan however can offer a neighborhood kiosk at McDonalds, drugstores, grocery stores and a lot quicker access to the library of physical DVDs.
A big question that still remains is the difference in content. If Verizon and RedBox can succeed where Netflix has failed in getting licensed content from providers who have previously been unwilling to play ball, then that might be the ticket to give Netflix a run for its money.
If Netflix’s streaming service margins are any indication, Verizon and RedBox might have an uphill battle in front of them. Netflix released their profit margins at the end of January which showed that the company’s physical DVD subscription service is many times over more lucrative than its streaming subscriptions.
TechCrunch broke down the numbers and found that DVD subscribers are worth about $17.32 to the company while streaming subscribers are only worth about $2.40. Margins overall were much higher for the company prior to its pricing model switch last year.
Regardless of how things shake out, it’s always exciting to see competition in a popular market. Hopefully Verizon and RedBox knocking on Netflix’s door will prompt more competition that will in turn benefit consumers. We covered Netflix’s original pricing model change in a blog last year; read through it and see how Netflix’s downhill descent started.