Verizon and Outerwall Shutter Redbox Instant
Verizon Communications Inc. (VZ) and Outerwall Inc. (OUTR) have decided to officially shutdown its video streaming business venture, Redbox Instant, effective Oct 7.
While Outerwall’s Redbox Instant offered movies to rent, Verizon’s widespread U.S. presence helped popularize the service. Lately, video streaming services have gained considerable popularity with increased smartphone and tablet usage along with higher rollout of 4G LTE technology. Thus, to capitalize on the opportunity, the companies had teamed up in Mar 2013.
Despite the successful venture, the Redbox Instant service was hurt by competition from low-cost video streaming companies like Google Inc.’s (GOOG) Youtube and Hulu. Netflix Inc.’s (NFLX) extensive movie and TV show collection coupled with ultra HD video offerings also posed significant challenges. As per reports presented by Sandvine, Netflix customers account for nearly 33% Internet streaming traffic in North America followed by Youtube, Amazon (AMZN) videos and Hulu.
In order to gain market traction, the service had been offered at reasonable video streaming rates between $8 and $9. However, the company continues to face stiff revenue fall and the service witnessed a 9.3% year-over-year drop in the second quarter of 2014.
The partnership also faced a number of credit card fraud cases where payments were made using fake credit cards. To deal with this, the company stopped subscribing new customers earlier this year. Moreover, it was not possible for new or existing users to add or change payment information on the website.
Such adverse aspects have impeded subscriber and revenue growth substantially. Hence, to cut down operating costs and offset other detrimental factors, both the companies have decided on dropping the service.
Verizon currently carries a Zacks Rank #2 (Buy).
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