Redbox and Verizon Ink Deal to Stream Something to Somebody

Full disclosure, I am not an analyst in the, well, paid sense. Yet I still find the news out of Redbox, that they’ve formed a joint DVD rental/instant streaming subscription service with Verizon, a little deflating, and not just because of the question that remains over what, exactly, they’ll be streaming. As TechFlash puts it:

One big unknown, however, is how – and where – the venture will gain rights to stream movies, TV shows and game content. They’re starting from behind, given the stock of content already available on Netflix and Amazon.

“But MvB,” you say, “you are in fact a streaming-only Netflix subscriber! What’s the problem?” I am glad you asked that very perspicacious question. Look, my interest in Redbox stems from its lowly roots as a Coinstar offering. Together Coinstar and Redbox begin to form the outlines of a kiosk company that serves what I like to think of as “regular America,” people who go to grocery stores not just because AmazonLocal is in no hurry to serve their hamlet, but because grocery stores work just fine.

Business analysts, by the nature of their work, are information workers–can you imagine any still creeping along on single-digit Mbps? People whose jobs are data-centric tend to develop a warped view of the way that people interact with the Internet. They can’t understand the person who logs on to Facebook once a month to see if they’ve got mail.

Yet, when you think that, in the first quarter of 2011, U.S. broadband penetration was 29.8 percent by population, you begin to suspect that perhaps not everyone is streaming. (Penetration by household is about 80 percent, but this would include highly popular mobile broadband devices.) When you notice the size of the backlash to Netflix’s attempt to go streaming-only–and the concomitant boost to Redbox’s DVD rentals–that impression is strengthened.

There’s a coalition, in fact, to whip these malingerers into pulling their weight of the broadband wagon: “About 100 million U.S. residents, about a third of the country, don’t subscribe to broadband service at home, said Julius Genachowski, chairman of the U.S. Federal Communications Commission,” disapprovingly, from the sound of it.

Let’s slice the broadband pie further, though, because cable and its 12 to 20 Mbps isn’t everywhere, yet. The less densely populated an area, the less hurry a cable company is in to invest in infrastructure, and so customers are stuck with DSL, and budget-minded customers are stuck with 1.5 to 3 Mbps speeds, which are not friendly to online streaming.

Broadband triumphalism insists that it’s almost not possible to live without it, but my sense is that more than enough people do for Redbox to have a future serving them through kiosks. (Broadband triumphalism stems from the same blinkered thinking that assumes everyone in the U.S. is a knowledge worker in the rough. Incredibly, some people still work with their whole hands, not just just their thumbs.)

So, to non-analyst me, it seems that kiosks, for Coinstar and Redbox, aren’t just a core competency but represent services to a substantial, overlooked demographic. I’d like to see them remain focused intently on that area. A third successful kiosk enterprise– their coffee kiosk is being tested–would really cement their reputation for turning unused floor space into gold. But a vaporware partnership with Verizon, a venture whose success can only eat into Redbox’s kiosk usage, seems at best an unneeded distraction.