Redbox Instant Is No Match for Netflix


Redbox Instant hasn't exactly lived up to its name so far. The combination DVD and streaming video service, jointly run by Coinstar and Verizon , 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 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 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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Fool contributor Demitrios Kalogeropoulos owns shares of Netflix. The Motley Fool recommends and owns shares of and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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