Verizon's Chance for Movie Streaming Gold
Andrew is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.
Across the internet, there have been multiple rumors that communication giant Verizon (NYSE: VZ) is making a push to get into the video streaming business. Rumors have circulated around a possible acquisition of Netflix (NASDAQ: NFLX), a current video streaming giant, or Redbox (NASDAQ: CSTR), a kiosk DVD rental machine. Both companies have pros and cons, one more than the other. Here is why I believe Redbox is the better acquisition.
Throughout 2011, Netflix has made several strategic errors that have caused a major rift in their customer base. Netflix claimed they lost over 800,000 customers alone in Q3 2011 after they announced an increase in the DVD rental/video streaming subscription plan. Netflix also announced plans to spin off the video streaming business into a separate entity. The combination of these blunders sent subscribers running for the hills. So how is this good news for Verizon? Before these errors, Netflix was a powerhouse of a company; with over 23 million subscribers, they simply owned the video streaming business. Now, Netflix is losing their competitive edge, and with quick action by Verizon and Redbox, can be overtaken from their video streaming dominance.
Redbox > Netflix
For the average movie buff like me, Redbox is a better financial decision. The price point is lower (despite a recent increase) compared to a monthly subscription to Netflix. While this price point issue will most likely become mute when and if Verizon acquires Redbox, they will probably move to a similar subscription type service. The thing that intrigues me the most is the concept of video game streaming. Currently, Redbox offers video game rentals through their kiosks, at an increased price. If Verizon is able to keep that feature and move to a video game streaming process, it could be the final blow for an already weakened competitor, Netflix.
The Final Line
While the rumors and speculations continue to swirl the internet, we won’t know for sure what the final result will be. It is possible Verizon will stay out of the video streaming arena completely or develop a streaming platform. However, if Verizon is looking for a quick and easy entry to the video streaming market, Redbox should be their ideal marriage.
Andrew Dillard does not own shares in NFLX, VZ or CSTR.