Kiosk operator Redbox will launch an instant video streaming service that starts at $6 a month, providing another challenge to dominant movie rental company Netflix Inc (NFLX.O) in the battle for home entertainment dollars.
The price for online movies from Redbox and Verizon Communications Inc (VZ.N) is lower than the $8 monthly fee charged by Netflix for unlimited viewing from its larger online library of films and TV shows.
"Redbox Instant by Verizon" will start selling subscriptions through a limited beta test later this month, the companies said in a statement on Wednesday.
Redbox Instant also will offer an $8-a-month plan with movie streaming plus four one-night DVD rentals from Redbox kiosks, a statement from the companies said. For $9 a month, customers can rent high-definition Blu-ray discs in place of traditional DVDs.
Streaming and DVD-by-mail packages start at $16 on Netflix.
A Redbox spokeswoman confirmed the company also will offer the $6 streaming-only plan.
The shares of Redbox parent Coinstar Inc gained 2.3 percent to close at $51.96 on Nasdaq. Netflix jumped 5.4 percent to $90.73 after a Morgan Stanley analyst raised his price target, citing the company's strong portfolio of content after last week's agreement for first-run Walt Disney Co (DIS.N) movies. Verizon shares rose 0.8 percent to $44.79 on the New York Stock Exchange.
Coinstar and Verizon formed a joint venture in February to sell video services in a market that is dominated by Netflix, but also has several new entrants, including Amazon.com Inc's (AMZN.O) Prime, Hulu Plus and HBO Go.
Redbox Instant subscribers will have access to movies from Viacom Inc's (VIAB.O) Paramount Pictures, Lions Gate Entertainment LGF.N and MGM through a deal with the Epix premium cable channel, as well as films from Time Warner Inc's (TWX.N) Warner Bros. That includes recent hits such as teen death match drama, "The Hunger Games," and Tom Cruise action sequel, "Mission Impossible: Ghost Protocol."
Customers will be able to stream the films to certain Internet-connected TVs, phones and tablets.
While Redbox Instant will offer a smaller library than Netflix, the new service contains enough content from major Hollywood studios to make it an attractive alternative, said B. Riley & Co analyst Eric Wold.
"They don't need everything Netflix has," said Wold, who has a "buy" rating on Coinstar and a "sell" on Netflix. "I think it's going to be a big draw for consumers."
But Morgan Stanley analyst Scott Devitt said Netflix's broad range of content, enhanced by new Disney movies that will reach the service in 2016, provided a key advantage for a company with 25 million U.S. streaming subscribers.
"It's about having the best and, right now, Netflix clearly has the best content portfolio, domestically," said Devitt, who raised his price target on Netflix shares to $105 from $80.
(Reporting by Lisa Richwine in Los Angeles and Himank Sharma in Bangalore; Editing by Supriya Kurane, Bernadette Baum and Andre Grenon)