Advanced Television

Analyst: Redbox Instant poses Netflix SVoD threat

January 28, 2013

By Colin Mann

Despite claims by Netflix that rival entertainment streaming services such as Amazon Prime, Hulu, and Redbox Instant are no threat to it in the subscription video-on-demand (SVoD) space, Tim Swann, Account Specialist, Entertainment at the NPD Group contends that Redbox will in fact be a formidable threat to Netflix for SVoD of movies.

Writing in the NPD Group Blog, Swan admits that, as it stands today, Netflix is 100 per cent right. “Netflix commands a 93 per cent share of the SVOD business. But history has a way of repeating itself, and we’ve seen a lot of churn in the video rental business over the past decade. Markets transform over time, especially when formidable competition comes to play,” he notes.

“It’s a fact that consumers want to watch movies. In the past three months, 86 per cent of consumers said they watched a full-length movie – either in theatres, or on a DVD, or digitally; however, Netflix has given movies the cold shoulder when it comes to content licensing for their Watch Instantly service,” he advises. “Sure, Netflix has signed deals to have exclusive second-run rights for DreamWorks Animation movies (beginning with this year’s movies) and Disney’s movies (which kicks in with 2016 theatrically released films).”

In terms of other studio deals, he notes that HBO and Universal extended their deal for another 10 years, while Paramount, Lionsgate and MGM own and provide content to Epix – and Epix has deals with Amazon, Netflix and Redbox. “Future movies of Sony and Fox are the only major studios not accounted for right now. Sure, Starz has the rights to Sony content – for now anyway – but that may not be true in the future. Redbox and Verizon could swoop in and grab that content before Starz locks it up for the future,” he suggests.

According to Swan, Redbox’s focus has always been on new release movies; that’s what made them successful and a household name. “The reason why Redbox will be a formidable threat to Netflix for SVoD of movies is because of the ‘new-release’ brand association,” he suggests. “Redbox won’t be able to add the newest movies to the SVoD portion of their service any sooner than Netflix can, but when you go to the Redbox Instant website, you will be exposed to the newest movies either to buy or to rent. As long as Redbox can offer, at minimum, a comparable movie SVoD library to Netflix, they can and will be a threat to Netflix, because of that brand association,” he says.

Swan reports that when it comes to movies, only 56 per cent of consumers rated the movie side of Netflix’s SVoD business as ‘excellent’ or ‘very good’ when it comes to ‘having movies they like’ – down from 62 percent in 2011. The numbers are even lower for satisfaction with availability of current releases for movies: just 38 per cent of Netflix subscribers said the availability of current releases was ‘excellent’ or ‘very good’, compared to 45 per cent in 2011. These are areas that Netflix does better in for the disc portion of their business, but with the majority of the focus on streaming, discs have been banished to a separate website and is no longer integrated with the streaming service. “Try going to and finding disc subscriptions – you’ll really struggle with that one,” he warns. Redbox is taking the approach with their service that helped Netflix Watch Instantly take off – using an integrated website, give consumers discs and subscription streaming for one flat fee.

Swan says the Redbox Instant interface, is easy to navigate, and in some ways actually easier than Netflix’s interface. “It’s still in its beta-test phase and there are definitely some adjustments that need to be made; but from what I’ve seen, it has the early makings of a quality user experience. There is a digital battleground only just now starting to take shape,” he observes.

“So, Netflix: Are you sure you want to write off Redbox Instant right away?” he asks.

Categories: Articles, Content, IPTV, OTT, Rights