Verizon and Redbox parent Coinstar announced their much-rumored joint venture this morning, promising a "new single-source, national multi-platform" service to be launched in the second half of 2012. The new service is squarely aimed at competing with Netflix. However, neither the press release nor a 5-minute press call revealed any substantive details about the service (e.g. content available, pricing, geographic availability, etc.). Verizon will own 65% of the JV, with Coinstar owning the remainder.

On the surface the alliance makes sense, marrying streaming and DVD rentals. Verizon brings its massive wireless footprint and tens of millions of subscriber relationships to the JV, a huge promotional platform. Also, via its FiOS roll-outs, it has relationships with key content providers. For its part, Redbox brings its 35,000+ rental kiosks along with its own Hollywood relationships. Theoretically, some combination of the two could yield a compelling offering.

However, as I pointed out in my initial analysis of this partnership, competing with Netflix is going to be a steep challenge. Even though Netflix stubbed its toe badly last year with the Qwikster/price increase decisions, and more recently has been on an ill-considered path to scrap its DVD-by-mail business, it still has 20 million+ subscribers, a relatively strong brand name and lots of streaming content. A big question mark for Verizon-Redbox is what content it will offer to differentiate itself? Most of Netflix's content deals are non-exclusive, but matching them will take a huge upfront investment from Verizon-Redbox. If the JV doesn't have comparable content quality, it will be very difficult to breakthrough.

An interesting path would be to emphasize the DVD side of the venture, at least at the start. With Netflix aggressively moving away from DVDs, it has opened a window for competitors who correctly recognize that physical media is still important, despite streaming's growth. However, the issue here is that Redbox's kiosks offer a very narrow selection of DVDs relative to Netflix's (or Blockbuster for that matter), and don't offer mail-in convenience. Combined, these are real drawbacks for anyone who's used Netflix or is considering a change.

Lastly, given Verizon's own FiOS business, and its new partnerships with multiple cable operators, the JV is unlikely to position itself as a cord-cutter's alternative, further depriving it of a breakthrough positioning.

Verizon and Coinstar executives were reluctant to announce any details given competitive concerns. While these are two big well-funded industry players, they still need to demonstrate how they're going to succeed in this highly competitive space.