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Is Redbox Instant Shutting Down?

Mari Silbey
9/30/2014
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Redbox Instant by Verizon may be rapidly approaching its end.

In a new GigaOM report, Janko Roettgers presents a compelling series of data points suggesting the over-the-top video service is on its way out. First, Redbox Instant isn't signing up any new customers. Thanks to a credit card fraud issue, the company has halted all new customer registrations "to make sure that criminals are not misusing our system to hurt innocent third parties." (It appears no current customer information has been compromised.)

That news wouldn't sound so dire, except that apparently the gates have been closed for three months already. And subscriber numbers weren't so hot even before the shutdown. (See Redbox Falls Flat in Streaming Space.)

Second, a Reddit user posted a rumor recently that Redbox Instant would be turned off entirely as of October 1. Roettgers asked for details from the company, but received only a curt "no comment." Light Reading also reached out to Verizon Communications Inc. (NYSE: VZ), but a Verizon spokesman said,"Redbox Instant by Verizon declines to comment."

Third, Redbox Automated Retail LLC is doing its best not to shine a spotlight on its joint venture with Verizon. On the Redbox website home page, there's no mention at all of Redbox Instant. And as Roettgers points out, the one page on the site that does mention the streaming service doesn't even provide a link.


Keep up with the latest in OTT video developments on our dedicated OTT video content channel here on Light Reading.


It's possible that Verizon is backing away from Redbox Instant in order to focus on the new mobile IP video service that it plans to launch next year. Verizon CEO Lowell McAdam said earlier this month that his company would use the OnCue assets it picked up from Intel Corp. (Nasdaq: INTC) earlier this year to kick off its new TV service in the first half of 2015. (See Verizon Plans Mobile TV Service in 2015 and Why Did Verizon Buy OnCue?)

In the meantime, however, the Redbox Instant rumors are helping to build the case against pay-TV providers trying to break into the subscription video-on-demand business. The rumors come on the heels of news that rival Comcast Corp. (Nasdaq: CMCSA, CMCSK) is changing strategy with its Streampix SVoD service. Specifically, Comcast is getting rid of its Streampix mobile apps and website, and has said "the Streampix service will simply be part of the Xfinity TV app and website, like other VoD offerings." (See Comcast Turns Off Streampix.)

Pay-TV providers are learning the hard way that it's not easy to compete with Netflix Inc. (Nasdaq: NFLX). The value of the OTT company's vast content library combined with its low monthly fee make Netflix a very hard act to follow.

— Mari Silbey, special to Light Reading

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Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
9/30/2014 | 11:42:40 AM
Netflix is fascinating
Netflix is a fascinating business model. It's so simple on the surface -- you'd think an incumbent could take it down easily. That was particularly true in its red-envelope days, before it offered a streaming service. 

Mailing out DVDs? How hard can that be?

Turns out "very," apparently. 
jabailo
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jabailo,
User Rank: Light Sabre
9/30/2014 | 12:13:45 PM
Re: Netflix is fascinating
I've thought as much.   The company seems generic enough -- put videos on server, charge monthly fee -- that it would be easily to duplicate, especially with universal cloud technology (Netflix is built on Amazon's).

However what I find with these "generic" companies is that, like soap and cereal, there is a combination of brand loyalty, low cost pricing and subtle deliniation that keeps them brand leaders.

For example, if you try to understand Netflix as simply an online video store, it makes little sense.  Many of the movies are unknown, small budget, non-first runs.  And those that are high quality are trickled out, few and far between.

So, what Netflix is, in my opinion is more like a channel than a store.  It's something you sit down and watch and can find things that are not great, but not bad either.   It's like AMC with newer stuff.

And really, that is not a criticism.  If you look at in hours watched, Netflix Instant is a fantastic value.  I always find something when I'm too tired to read or compute or go to the gym.

 
briandnewby
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briandnewby,
User Rank: Light Sabre
9/30/2014 | 2:01:28 PM
Re: Netflix is fascinating
I think Netflix very much is like a channel.  It's basicall HBO without the front end of cable subscription.

HBO really is trying the same model--all shows on demand immediately after showing and then also having them on devices.  The library is more limited with HBO (at least HBO's choice is that the library is much more limited).
jabailo
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jabailo,
User Rank: Light Sabre
9/30/2014 | 2:32:16 PM
Re: Netflix is fascinating
Netflix's Recommended for You is sometimes uncannily good.   Yes, I would like to watch a few of these films and having done so, enjoy them.  Lots of times its more like the present your grandma buys you (but you always liked sweaters) which you promply exchange for something cooler.

Ideally, I would simply sit down and one of these channels would entertain me.  I would clap my hands, say "Begin!" and it would present video entertainment that would, make me want to watch.

That might involve some combination of AI like IBM's Watson, plus really great data mining from my Facebook interactions, plus voice commands so I can "surf" through options when it gets it totally wrong.

 
smkinoshita
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smkinoshita,
User Rank: Light Sabre
9/30/2014 | 5:29:38 PM
Re: Netflix is fascinating
"Lots of times its more like the present your grandma buys you (but you always liked sweaters) which you promply exchange for something cooler."

I find that happens a lot of times when computers try to make recommendations.  So far the only one that I've found quite good has been Amazon's.  Most others I've tried are pretty off most of the time.

I'd love to see Watson improve things.  Then maybe the marketing department could get a clue.
briandnewby
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briandnewby,
User Rank: Light Sabre
9/30/2014 | 6:24:58 PM
Re: Netflix is fascinating
Predictive analytics in entertainment IS pretty spot-on.  I did see Amazon slip recently and not flag a book I bought before as "you purchased...."  Not quite the same thing, but I've come to expect retailers to know me better than I know me.  Last night, in fact, QVC almost talked me into a line of wigs, nearly convincing me that they could be shaped quite manly.
danielcawrey
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danielcawrey,
User Rank: Light Sabre
10/1/2014 | 9:31:30 PM
Re: Netflix is fascinating
The one issue I would say Netflix has is that despite its interface that allows for easy searching, one quickly realizes that the amount of content is limited. Cable and satellite providers actually have an upper hand in that the access to content is multitudes higher. 

They should at least try to exploit this – most proviers are not doing this yet. 
MikeP688
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MikeP688,
User Rank: Light Sabre
9/30/2014 | 4:01:43 PM
Re: Netflix is fascinating (Brief Thoughts)
I am hoping to get my act together to actually test Netflix on my new ROKU device this week!! :-)  As for it almost being a Channel, I suggest that it is due to the very nature of how it is spreaheading original programming, understanding and customizing as required.     Here is the issue w/some of the ondemand "stuff":   Every "on demand" is asking $ 7/$8 for some of the new releases?   It will be interesting as Verizon works on the transition to the service as noted, what next?  What is the cost?  How will it help with on-going traffic?

 

 
briandnewby
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briandnewby,
User Rank: Light Sabre
9/30/2014 | 7:57:20 PM
Re: Netflix is fascinating (Brief Thoughts)
Isn't that the ultimate issue with cutting the cord, or cutting cable in favor of Netflix and other things? Sticking it to the cable company isn't really sticking it to them when they also provide the Internet service.
MikeP688
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MikeP688,
User Rank: Light Sabre
9/30/2014 | 10:21:15 PM
Re: Netflix is fascinating (Brief Thoughts)
The tragedy of the times we live in..that's why I am routing for Google Fiber. :-)
briandnewby
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briandnewby,
User Rank: Light Sabre
9/30/2014 | 10:36:43 PM
Re: Netflix is fascinating (Brief Thoughts)
Just signed up for Google Fiber in KC. We need about 130 more homes to be able to get it. The Internet is free, except you have to pay for the install (about $300). Or, we're signing up for a plan that is about $120 with faster Internet and cable, no install fee. Many thoughts, though--mostly, more power to the television networks for continuing to charge more per show for advertising while viewership has dropped dramatically.
Susan Fourtané
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Susan Fourtané,
User Rank: Blogger
10/1/2014 | 2:37:52 AM
Re: Netflix is fascinating (Brief Thoughts)
Brian, 

It's wonderful you signed up for Google Fiber. :) 

"The Internet is free, except you have to pay for the install (about $300). Or, we're signing up for a plan that is about $120 with faster Internet and cable, no install fee."

How fast would that Internet be? 

The television networks are going to suffer even more changes and will have to adapt, or tranform into something else. 

-Susan

 
KBode
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KBode,
User Rank: Light Sabre
10/1/2014 | 7:57:53 AM
Re: Netflix is fascinating (Brief Thoughts)
Their symmetrical 1 Gbps tier is $70, bundled with TV services it's $120, and the "free" tier (after $300 installation fee) is around 5 Mbps.
Susan Fourtané
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Susan Fourtané,
User Rank: Blogger
10/2/2014 | 3:49:40 AM
Re: Netflix is fascinating (Brief Thoughts)
Thanks, KBode. 

Are you in one of Google's invited cities to try Fiber? 

5Mbps? That's too slow. :/ Now I see why it's free. However, the installation fee for such slow connection seems to be expensive. Maybe they are actually charging several years of service in that feel. :D I don't find any logical explanation for this. 

-Susan
KBode
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KBode,
User Rank: Light Sabre
10/2/2014 | 7:19:09 AM
Re: Netflix is fascinating (Brief Thoughts)
No, unfortunately not. :)

I am however lucky to be in a Verizon FiOS neighborhood, even though the company seems insistant on driving up costs each month. I will say I've never once had an outage or even a hiccup on the line since 2008, though....
Susan Fourtané
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Susan Fourtané,
User Rank: Blogger
10/3/2014 | 6:07:36 AM
Re: Netflix is fascinating (Brief Thoughts)
KBode, 

Well, Google plans to expand to other cities in the future. 

I think the prices of broadband in the US are quite high. They are supposed to lower, not higher. Why should Verizon be driving costs up? 

-Susan
brooks7
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brooks7,
User Rank: Light Sabre
10/1/2014 | 10:13:56 AM
Re: Netflix is fascinating (Brief Thoughts)
Brian,

I think you will find that the margins on broadcast video are razor thin.  They pass almost all the dollars along to the content companies.  Which is why I find this notion that the content companies are going to pay to be distributed humorous.  Imagine this scenario, Comcast does something and Google cuts off service to all Comcast customers.  No search, no Youtube, no Gmail, etc.  Before you laugh, think about the arguments between various channels and cable/satellite.  Who caves?

seven

 
Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
10/1/2014 | 11:18:54 AM
Re: Netflix is fascinating (Brief Thoughts)
With the razor-thin margins that you mention, there is no way for Verizon to run this profitably if there's even a hint of fraud. Target has blamed much of its poor business late last year and early this year at the fraud there. And who knows what will happen to the grocery chains that use the Supervalu system that's been hacked twice in the last few months.
MikeP688
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MikeP688,
User Rank: Light Sabre
10/1/2014 | 1:48:34 PM
Re: Netflix is fascinating (Brief Thoughts)
I am seriously considering replacing my current card since I just bought something at Albertsons yesterday.     WHat is unfortunate is how companies play the "blame game" without truly appreciating and recognizing their own culpability.    I can't help but wonder whether going for and vying for a "post-digital world" will be a solution.   But what is happening now is pure insanity.   
briandnewby
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briandnewby,
User Rank: Light Sabre
10/4/2014 | 1:13:01 PM
Re: Netflix is fascinating (Brief Thoughts)
@brooks7

I've often said the missing element in network neutrality is the concept that there could be tiers of websites.

In cable TV, we buy channels.  In Internet, we buy access.  Why is that different?

Why couldn't Yahoo, Google, and certain sites be free, and extra be premimum just to access (I'm not advocating, believe me, just asking).  Airplanes do this, by the way.  Amazon is free on an airline, other sites aren't.
brooks7
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brooks7,
User Rank: Light Sabre
10/4/2014 | 1:56:10 PM
Re: Netflix is fascinating (Brief Thoughts)
Hi Brian,

Well, the question would be what would I get from the premium tier of websites.

When I buy a premium channel on TV I get access to the content.  Without the purchase, access is denied.  The reason for this is the cost and marketing model of the content.  I am a Comcast subscriber and just went to their site.  I see the following message in the details of one of the bundles:

HBO® ranges from $13.95 to $23.95, depending on area.

Given that the Starter Package has 140 channels as at about $0.50 a channel you can see that there is a HUGE premium for the content. I would think that a better analogy is that Netflix would be sold by the ISPs.  You can get Internet or Internet with Netflix.  Netflix cost $8 a month and Netflix gets $7.75/month from the ISP.  The gain for Netflix is that has one HUGE bill that it deals with and doesn't care about processing your credit cards.  

I used to sell Spam Filtering to ISPs through a company named Edgewave.  We liked selling to ISPs because even if the average price per mailbox was low, we got to collect one bill and a bunch of mailboxes from one customer relationship.  Some ISPs (yes even today) upsold Spam Filtering and we had a feature which turned of content filtering for specific mailboxes.  In some ways, that was a lot like this.

Right now our Tiers are supported by paying premium sites directly.  

If your proposed model came to pass, then Google is going to come ask the ISPs for its cut of each customer (just like Disney does today).  Imagine what happens when you get a page that says, "We are in a dispute with Comcast.  We have blocked all non-premium subscribers from our services.  We here at Google ask your help by telling Comcast how much you like our services."  This is what happens when content owners and cable companies get in disputes today.

Okay, here is the thing about airplane analogies and road analogies.  If I cross the Golden Gate Bridge in a Kia or a BMW I pay the same toll.  Airlines do not do a credit check when they sell me a seat.  The choice of how much I pay is a LOT up to my behavior (when did I book) as much as what I book (First Class or Economy).  Airplanes are selling seats to users based on a very complicated pricing model.  Doing so on Internet Bandwidth would only work in a scarcity model (just like stadium seating).  The pricing models and goals we have are abundance models.

In some ways, I like the bandwidth cap models for usage.  Users get an amount bundled and get to buy in increments.  I don't like the pricing jumps or the small amounts on the caps.  But I like the general concept.  My model would be that you get the first 10GB bundled and lets call it $1/GB (for round numbers).  Each additional GB adds $1 to your bill dynamically.  For wireless maybe the number is 50G and wireline 500G bundled, but that is the idea.  

seven

 
briandnewby
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briandnewby,
User Rank: Light Sabre
10/9/2014 | 2:23:36 PM
Re: Netflix is fascinating (Brief Thoughts)
Seven,

I think the leap (well, one of the leaps) is that Google is the same as Disney (and it may be, actuall). 

And, in your illustration, Google wouldn't be able to give the "dispute splash screen," and Comcast would be the one controlling the message.

So, all of those are fun little nuances to play with, I guess--good topics when I run.

I'm not really proposing the cable-like model, just wondering why it isn't in place.  And, I agree with the scarcity and abundance thoughts, but are those really both the model and the goal?  I do think bandwidth is more scarcity than abundance.  Heck, a bridge is more scarcity than abundance because, likewise, only so many can travel across it at one time.

I liked your post because it critically looked at some of these, but I'm left wondering if the model that exists simply is broken, and then I think about how all pricing models in all industries eventually seem broken, so maybe that's good??? 

 
brooks7
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brooks7,
User Rank: Light Sabre
10/9/2014 | 7:00:56 PM
Re: Netflix is fascinating (Brief Thoughts)
brian,

Thanks for your comments!

Yes, in the direct cable analog it is the MSO that spits out the dispute screen.  But in my model, the person that is going to want to get paid is Google.  It can detect the source of the incoming IP connection by IP address and block customers through a redirect based on that.  Yes, this is a leap...but something to think about.  :)

Essentially, the biggest single issue is that a forum on a telecom news website is insufficient for an effective and broad conversation.

seven

 
MikeP688
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MikeP688,
User Rank: Light Sabre
10/1/2014 | 1:45:34 PM
Re: Netflix is fascinating (Brief Thoughts)
Looking foward to your periodic thoughts on it Sir--Part of the "lure" of the traditional Cable Companies is convienence.  For me, as an End User, I have been a bit "leary" as I continue to assess my ROKU player and see if it makes sense.  I was gratified, though, to see some of the more regional players pulling the plug on the expensive TV providers that the Wall Street Journal Reported on.   Maybe that's why Comcast is so keen to expand its' "reach" so that it will have an end to end way to distribute its' content.    I also wonder the "bravado" that CBS' Chief had recently in his conversations on Bloomberg may prove to be hollow if they're too aggressive.   

Truly interesting times..as we begin a new month..and a new quarter :-) 
Michelle
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Michelle,
User Rank: Light Sabre
10/1/2014 | 10:04:19 AM
Re: Netflix is fascinating (Brief Thoughts)
@Brian excellent point not often made in this argument.
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
10/3/2014 | 5:21:41 PM
Re: Netflix is fascinating
jabailo - A friend who is a Netflix fanatic said you almost never find what you want on Netflix, but you always find something interesting. He seems to split his viewing between highbrow documentaries and lowbrow B-movies. Ask him what he's watching and he'll either say "A fascinating documentary about the religious parallels between Charlemagne and the Ottoman Empire under Suleiman" or "Fast and the Furious Part 23: Faster and Furioser."
jabailo
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jabailo,
User Rank: Light Sabre
10/4/2014 | 10:37:10 AM
Re: Netflix is fascinating
Some of my best finds are TV series...not always the ones you think.  "The Following", "Longmire", "The Departed" (French version), "Gold Rush" all held my attention night to night or with weenend binge watching.

Take Gold Rush -- 3 seasons, 50 episodes of an hour each.  That's the equivalent of 25 movies.   That's a lot of entertainment hours for just one TV series!

The other types of movies that I find interesting there are these little known horror/thriller/sci-fi flicks.  Many of them are less stage-y and gore-y than traditional movies and have added back in the Twilight Zone era absudist plots...a more cerebral form of horror.
 
KBode
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KBode,
User Rank: Light Sabre
10/1/2014 | 7:59:31 AM
Incompetence and apathy
It seems like the failure here is a combination of both incompetence and apathy. I'd seen numerous users note that Verizon wasn't really advertising this service at all -- and after the credit card security issue popped up many people noted they just sort of gave up. This was on top of a "me too" service that really wasn't very good to begin with.
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