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Verizon, Redbox to Pull Plug on Video-Streaming Service

Unable to make headway in competing with Netflix, Verizon Communications and Outerwall’s Redbox unit said Saturday they will shut down their streaming-media joint venture.

Outerwall (then called Coinstar) and Verizon formed Redbox Instant by Verizon in February 2012, with Verizon owning 65% of the JV. The companies debuted the service in March 2013. Under the most recent subscription plan, the $6 monthly service provided access to 6,000 movies across different devices, as well as rentals and purchases of select titles.

But it never took off, given limited content selection and poor marketing. Now the Redbox Instant by Verizon service is slated to shut down Tuesday, Oct. 7, 2014, at 11:59 p.m. Pacific, according to the companies, which never disclosed how many subscribers had signed up.

“The service is shutting down because it was not as successful as we hoped it would be,” the companies said in a notice on the Redbox Instant by Verizon website. “We apologize for any inconvenience and we thank you for giving us the opportunity to entertain you.”

Redbox’s parent Outerwall had invested $63 million in the JV, including $10.5 million this year through June 30, according to regulatory filings. It’s not known what majority owner Verizon contributed, but under the initial agreement the parties agreed to invest up to $450 million in the venture.

SEE ALSO: Studio Deal Renewals Could Hurt Redbox, Analyst Warns

The companies said they will provide a one-month subscription fee refund to customers who will have received only a partial month of service through Oct. 7.

The original idea with Redbox Instant by Verizon was to offer unlimited streaming of older and recent movies — like Netflix — coupled with access to four DVD rentals per month from Redbox’s 35,000 kiosks nationwide for new releases. Consumers, though, didn’t find the offer compelling.

“As a top entertainment destination, Redbox will continue to find new ways to satisfy consumer demand for new release entertainment at an unrivaled value,” a company rep said in an email.

Redbox, which has several studio deals expiring in the next seven months, could face higher pricing from studios — or the studios could relay DVD release windows, or may decide stop supplying titles to Redbox altogether, B. Riley & Co. analyst Eric Wold wrote in a note last month downgrading Outerwall’s stock from “neutral” to “sell.”

Universal renewed its agreement with Redbox through Dec. 31, 2015, Outerwall said in a Sept. 30 regulatory filing. And Redbox this past week announced Mike Saksa, previously U.S. executive VP and g.m. of theatrical new releases for Warner Bros. Home Entertainment, as SVP of content.

Separately, Verizon is acquiring programming rights for a planned wireless TV service that it’s looking at launched in mid-2015. The telco on Wednesday announced a deal with Viacom, under which Verizon has national rights to distribute the media conglom’s programming.

Some reports Saturday said Redbox Instant by Verizon had stopped signing up new customers in June because of a credit-card fraud problem. According to Verizon and Redbox, the site suspended credit card orders because cybercriminals were using the customer-registration process to validate stolen credit card info.

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