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Web Watch: Verizon and Redbox Take a Shot at Netflix, Facebook Faces Its Critics

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A new joint venture aims at disgruntled Netflix subscribers. Plus: The Facebook backlash begins.

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Verizon (VZ) and Redbox owner Coinstar (CSTR) announced Monday that they will jointly launch a streaming video service in the second half of 2012. The new Redbox service will be priced to compete with Netflix (NFLX). In fact, it seems to be practically targeted to disgruntled Netflix subscribers.

No pricing has been announced, but The Associated Press reports that the company late last year was "shopping around" the idea of a $6 monthly fee for a service that combined DVD rentals and streaming videos. It's a good bet that the final figure will be lower than the $15.98 that Netflix now charges for both DVDs by mail and streaming service.

At the time, Netflix said it saw its streaming service, priced at $7.99, as the future. But some subscribers objected, citing the richer offerings available on DVD.

Coinstar's quarterly results, also released Monday, came in better than expected, largely because of a boost in Redbox rentals, and company comments made it clear that it thinks it picked up some grudge-carrying Netflix subscribers.

As if to emphasize the point, Redbox made a third announcement Monday: that it is buying the rival Blockbuster Express kiosks and inventory from NCR Corp. (NCR) for about $100 million. So that's another 10,000 bright red DVD rental boxes standing near the checkout line at a story near you.

Nevertheless, this is really Verizon's deal, as the telecom owns 65% of the new venture.

So, in order to succeed, Verizon has to figure out the biggest problem facing Netflix and other rivals including Amazon (AMZN) and Hulu.com. That is, how to get distribution rights to the best, newest and widest range of programming, while still charging a fee that its customers are willing to pay.

Netflix is spending at least $1 billion a year for its current selection, and maybe as much as $1.4 billion, according to various sources. Its costs are growing as it focuses on building a library of streaming titles.

The Redbox inventory is about 200 titles.

Web Weekly In Brief:

Facebook: Cool or Not Cool?
If your name was Zuckerberg, this would be the scariest headline of the week: Facebook Is No Longer Cool.

That's the kind of week Facebook has been having, since it filed the paperwork to launch its initial public offering (IPO).

In addition to the business analysis of the hard numbers contained in that paperwork, the company is getting a raft of media attention that is aimed at consumers, particularly at the vast chunk of them (845 million at last count) who are on Facebook.

Al Lewis, in the Wall Street Journal, argues that Facebook's debut inevitably will be "IPO madness" because "consumers love buying brand-name stocks."

Sounds reasonable, and that makes its public image important, too. The PR folks at Facebook must be turning green in the face this week. Here are just some of the latest headlines:
  • Facebook Is Using You: The New York Times points out that the Facebook company inventory consists almost entirely of personal information about its users, which it packages in batches for sale to advertisers.
  • Facebook Users Ask, 'Where's Our Cut?:' Also from the New York Times, and a very good question it is, too. Google's (GOOG) blog business model gives a cut of the revenue from ad impressions to the blogger. What exactly is the difference? For that matter, Google actually produces vast amounts of content, such as its Street Views and Google Maps. Facebook produced a blank slate.
  • Facebook's Governance Attracts Scrutiny From Pension Fund: Bloomberg reports that the California State Teachers' Retirement System is "in the beginning stages of engagement" with Facebook over its shareholder voting rules. CEO Mark Zuckerberg owns 28.4% of the stock, but controls 56.9% of voting power. It seems that he multiplied the power of some of his own shares by a power of 10 or so. The pension fund owns shares through its private-equity managers.
  • Facebook Has Only Men on Its Board of Directors: From Bloomberg News, again. Only 11.3% of companies in the Fortune 500 have no women on their boards. The rest have at least one woman director. Perhaps they sincerely believe that this woman can make a contribution to the business. Or, they don't want to look like Neanderthals.
An Amazon Storefront?
The idea of a brick-and-mortar Amazon store sounds like an oxymoron. The rumor is that Amazon will open a store in Seattle to showcase its Kindle e-reader and tablet line and sell its Amazon Exclusives catalog of books. The few bookstores still in existence in the real world have declined to carry the online retailer's books.
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No positions in stocks mentioned.
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