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Should Netflix Fear Redbox?

Coinstar (CSTR) is the company behind all those Redbox video rental kiosks you see all over the place, but it wants to take its business to the next level. Back in February, the company announced plans to team up with Verizon (VZ) to offer subscribers streaming content, and next week a beta version of the service is going to go online.

The web video market is thriving, and Redbox realizes that in order to remain relevant in the years ahead it needs to get a foothold in the market, and sooner than later. Netflix (NFLX) has long dominated the market, but over the past year and a half it has lost a great deal of customer loyalty, creating a great opportunity for another player to come in and steal away its customers.

The Verizon/Redbox joint venture will give customers the chance to sign up for an $8 a month membership which would entitle them to four one night rentals from Redbox kiosks, and unlimited streaming video.

Netflix has a similar $8 a month plan for unlimited streaming, but in order to get one physical DVD at a time requires an additional $8 a month plan, so customers may view Redbox as the better option.

The main concern will be the size of its library, but while the library will be significantly smaller than Netflix’s and the other big player Amazon (AMZN), it will be big enough to attract customers, but will it be enough to keep them? Like Netflix, Redbox has a deal with Lions Gate Entertainment, which gives it access to a lot of new blockbuster hits, but it will still need to beef up its library to be a serious threat to Netflix.

Redbox believes that consumers will overlook its smaller library in order to use a service that allows physical rentals, streaming, downloadable movies for purchase, and video on demand rentals without a subscription all in one place. It does sound attractive, and is something that neither Amazon nor Netflix offers, but without a big enough library users will quickly look for alternatives.

Content is king, and until Redbox has enough content to keep users happy it is going to struggle to keep up with the already established players in the industry.

Michael Fowlkes

Michael Fowlkes is a financial writer who has been with the Fresh Brewed Media family since 2004. Over the course of his tenure with Fresh Brewed Media, he has worn many hats, including portfolio manager, options analyst, and writer. Michael received his undergraduate degree from Virginia Tech in Accounting and got his start in finance working as a stock trader for six years at Chase Investment Counsel in Charlottesville, Va.