Verizon, Redbox plan Netflix challenge

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Verizon and Redbox declined to comment on the pricing.

The alliance will mark Verizon's first foray into video streaming outside its network operating region as the telephone company so far only offers Web video services to subscribers using its FiOS TV service which competes with cable providers like Comcast Corp and Time Warner Cable.

However, Verizon/Redbox's success in competing with Netflix and other online rivals like Amazon.com and Hulu Plus, will depend hugely on the price of the service and the depth of content it has available, according to analysts.

"We're in negotiations right now (and) finalizing," Bob Mudge, Verizon's head of FiOS, told Reuters. "I feel very confident we'll have a wide set of digital distribution content."

The executive promised a subscription service and "other options" with the "right pricing" to compete but declined to give details of the service or to comment on how much it would cost Verizon, which has already spend about $23 billion upgrading its copper network for its FiOS TV and Web service.

Verizon and Coinstar will need to invest heavily to convince Hollywood studios to participate to create a service comparable to Netflix, said Hudson Square Research analyst Daniel Ernst.

"The question is, how much are they investing to get a large library of programming? Netflix is spending up to $1 billion a year on content," said Ernst. "For me, it's doubtful that these two companies will invest to that level."

According to regulatory filings Redbox will make an initial capital contribution of $14 million in cash, implying that Verizon would contribute around $26 million.

As Netflix has shifted its emphasis to instant-view streaming from its mailed DVD rental service, it has had to write ever-heftier checks to content.