Redbox ties up with Verizon to offer online movie service

DVD rental company Redbox is entering into a tie-up with Verizon Communications Inc as part of a major step forward to compete with Netflix Inc in both the digital and physical worlds.

The company, famous for its ubiquitous red DVD rentals kiosks, announced yesterday that it was forming a joint venture with telecom giant Verizon to create an online movie subscription service.

Redbox also agreed to spend up to $100 million for the acquisition of Blockbuster-branded DVD kiosks operated by NCR Corp, its largest rival in the business, adding about 9,000 machines to its existing base of 35,400.

The digital delivery service, expected open in the second half of 2012, would be majority owned by Verizon, which will see the telecom company emerge as the first telco to stream video to customers who are not already its subscribers.

The development would come as a significant step, as until now, Verizon, like Time Warner, Comcast, AT&T and other telecom and cable providers, had gone after customers only in the markets where it delivered television and internet services. Now Verizon would be seeking a national audience.

For customers, Redbox would emerge as a more formidable competitor to Netflix, adding a robust streaming internet option to its near-total domination of the popular kiosk rental market.