Well, almost ready: “Redbox Instant by Verizon” will go into an invitation-only beta launch this month, and the official push won’t start until next year.

Still, this means the company is officially unveiling its offering. Which is exactly what we told you it would be: A service that’s supposed to offer some streaming video, a la Netflix, and some movies via DVD, a la the old Netflix and the curent RedBox. And the ability to buy and rent individual movies online, like iTunes and Amazon.

The basic offer: $8 a month for a selection of streaming movies and the ability to rent up to 4 DVDs a month from Redboxes’ kiosks, plus an online store where you can buy or rent newer movies.

If you don’t want to or can’t use the Redbox kiosks, you can go for a streaming-only option for $6. If you want to rent Blu-ray discs, that’s $9 a month.

Like Netflix and Amazon, Redbox has a deal with Epix, which means you’ll get newish movies like “Thor,” along with some big titles like “The Hunger Games,” after they’ve been available for rental and on pay TV. It also has a similar deal for older movies from Warner Bros., which hasn’t cut deals with Netflix or Amazon (yet).

But the joint venture won’t have the deeper catalog titles its competitors have built up. And it has pretty much ignored the TV titles that Netflix in particular has concentrated on in recent years.

On the other hand, it will have an online store where you can rent and buy movies, which Netflix doesn’t offer — because, says CEO Reed Hastings, everyone else does. Though this store will be different from those run by other online retailers like Amazon and iTunes: For whatever reason, the company hasn’t signed on all of the studios, so there will be notable gaps from the likes of Disney and Sony. (Update: Redbox Instant says it does have a deal with Sony, after all.)

So basically: Costs about the same as Netflix, without some of the stuff people like about Netflix, with other stuff Netflix doesn’t have.

Is that compelling enough to take market share away from Hastings? We’ll have to wait some time to see, but it’s worth noting that Amazon and Hulu, which have been at this for a while, have yet to make a real dent.

In the meantime, the most interesting thing about Redbox Instant is what it could be, one day, if Verzion wants to push it. The service isn’t confined to Verizon’s fiber or wireless footprint, which means it could truly make it a national video service, if it wants to commit the resources. So far this looks more like a toe in the water than anything else.

The culprit for the dyspeptic reaction: The company’s Q3 domestic subscription numbers — as well as its guidance for Q4 — fell below investors’ expectations.

But if things are tough for Netflix how, they’re only going to get tougher.

The company used to have the Web home video market more or less to itself, and now it doesn’t. It’s facing competition from Amazon, Hulu and the cable companies, and is about to start fighting a joint venture between Redbox and Verizon.

That’s not a new observation, of course. But in this quarter’s letter to shareholders, Hastings spells out the strengths and weaknesses of many of his competitors, and it makes for very interesting reading. The two biggest takeaways I found on my first scan:

• For the first time, Amazon appears to be making headway against Netflix with its digital offering.
• Netflix doesn’t believe HBO and Time Warner executives when they say they’re not going to sell a Web-only offering. They expect to compete directly with the pay channel, via an a la carte Web offering, in the U.S.

The breakdown: Jeff Bezos and company have been building up a digital streaming service that they’ve been bundling with their Prime service for a couple years now. And for a couple years, Netflix — as well as the studios that sell Amazon their programming — has said that consumers don’t seem to be using Amazon’s service very much.

If I’m interpreting Hastings’ comments correctly, that’s changing. Here’s what Hastings said about Amazon last quarter, which echoes comments he has made for several quarters: “We have yet to see Hulu Plus or Amazon Prime gain meaningful traction relative to our viewing hours.”

But here’s Hastings today: “Our estimate is that viewing of Amazon Prime Instant Video has yet to pass that of Hulu.” Perhaps I’m misreading Hastings’ comments here, but he chooses his words pretty carefully (and I’m told he does write these things himself). And to me, there’s a real difference there — one that reads as if Bezos is coming up in Hasting’s rear-view mirror.

As far as HBO goes, no interpretation needed here. While everyone from Time Warner CEO Jeff Bewkes on down says that HBO needs to be tied to the pay cable business in the U.S., Hastings says that’s going to change: “We think it will make strategic sense eventually for HBO to go direct-to-consumer in the U.S., and become more of a competitor to Netflix; so, that is our operating assumption …”

It’s possible that Hastings is wrong here — I’m quite sure Bewkes isn’t bringing him in for confidential strategy discussions.

But if he’s right, that’s great news for the “I want ‘Game of Thrones’ and I don’t want to pay for cable” crowd. And a real serious challenge for Hastings and his shareholders.

And now, if you watch movies from Amazon’s “Prime Instant Video” service, you can see the same movies, including hits like “Iron Man 2,” “Thor” and “Captain America.”

Amazon announced a new “multi-year licensing agreement” today, just a few days after Netflix’s exclusive deal with Epix expired.

Netflix has already made Wall Street well aware that it was losing its exclusive, while downplaying the importance of the deal. Of course, it was more excited about it a couple years ago.

Netflix still gets its hands on the same movies, and will likely have them through 2015.

Epix, controlled by cable giant Viacom, is likely to be as promiscuous as it can with its newfound freedom. Look for the same movies to play a major role in the Verizon/Redbox video service set to launch this fall.

Meanwhile, Amazon, as you may have heard, has an event coming up on Thursday, where it will have new hardware to show off. Nice to have new content to play on those boxes, too.

PS: Since it’s the season, here’s some bonus fact-checking for you:
Claim:Amazon’s release says the deal brings “popular new release movies including The Avengers, Iron Man 2, The Hunger Games, Super 8, Thor, True Grit and more for Prime members to instantly stream at no addition cost.”
Truth: Almost, but not quite. Lionsgate’s megahit “The Hunger Games” will eventually get to Amazon Prime, as well as Netflix. But right now the only way to get your hands on the movie (legally) is to buy or rent it. Meanwhile, you can’t get “The Avengers” anywhere.

At least as important, though, are the video service’s subscriber numbers. Here investors were looking for 24.3 million domestic streaming subscribers, 9.1 million DVD subs, and 3.7 million subscribers from Canada, Latin America and the U.K., and Netflix didn’t quite get there: 23.9 million domestic, 9.2 million DVD and 3.6 million international.

Wall Street is unhappy with something here: NFLX has plummeted 14 percent since the release hit the wires.

As always, here’s a cheat sheet from Citi’s Mark Mahaney, so you can play along at home (click to enlarge). Pay attention to guidance from Netflix on boths subs and financials, as this has been a flashpoint in the past.

Here’s a possible warning flag for investors on Q3: Netflix is saying that the summer Olympics could impact growth. That’s the first time I believe I’ve heard them warn about that.

Here’s CEO Reed Hastings in his investor letter:

For Q3 quarter-to-date, our domestic net additions are very nearly the same as Q3 2010 over the comparable partial period. In that quarter two years ago, we finished with 1.8 million domestic net additions. However, in the middle of that quarter, we launched Netflix on the iPhone to great reception, and we don’t have an equivalent launch this quarter. Moreover, this quarter the Olympics are likely to have a negative impact on Netflix viewing and sign-ups. So, our Q3 guidance is 1 million to 1.8 million domestic net adds. If we finish Q3 in the high end of that range, we would remain on track for 7 million domestic net additions for the year; otherwise it would be challenging to achieve that goal by year end.

That said, the guidance that Netflix is offering for Q3 would seem to be what investors were looking for: Up to 25.7 million streaming subs, 4.4 million international and 8.7 million DVD subscribers.

Another heads up: Netflix says it will launch a new international market in Q4, which will put the company in the red that quarter.

What about competition from the likes of Amazon, and, soon, Verizon? Still not a problem, Hastings says:

We have yet to see HuluPlus or Amazon Prime Instant Video gain meaningful traction relative to our viewing hours, but as we continue to build a domestic profit stream they are likely to increase their efforts to gain viewing share. Redbox Instant by Verizon, once they launch, will face a big challenge to break into the top 3 of subscription streaming services.

And here’s a bouquet for HBO. Wonder if it will sway Jeff Bewkes: “While we compete for content and viewing time with HBO, it is also possible we will find opportunities to work together – just as we do with other networks.”

Now they’re back, and they’re saying a little bit more: The service has a name — Redbox Instant by Verizon — and a CEO — Verizon executive Shawn Strickland. Redbox owner Coinstar says the service is in “alpha” testing, and says a full launch is “anticipated later this year.”

And that’s it as far as official details go. What about the stuff we care about — pricing, titles, strategy? We’re supposed to keep waiting on that stuff. But in the meantime, I can offer some educated guesses:

• Expect the new service to focus on movies instead of TV shows. That makes sense, because the existing Redbox service is basically a movie service. And it also makes sense because Netflix and Amazon are already spending lots of time and effort licensing TV shows for their subscription video services.
• Don’t expect to be blown away by the subscription service’s digital movie selection: Hollywood studios weren’t excited about giving Netflix access to relatively recent films for its service, and I don’t think they’ll treat Redbox Instant any differently. Deals with the likes of Viacom’s Epix will give the service a handful of more recent movies — just like Netflix offers — but the bulk of the selection will almost certainly be catalog titles, which the JV will market as “movies that matter.”
• But if you do want newish movies, you’ll have options: The service will offer customers a certain number of trips to Redbox kiosks, so you can get newish titles that way. And I believe it will also offer a la carte video-on-demand rentals, either at launch or later down the road. That is, anything you can rent from iTunes, Amazon, etc., should also be available through the JV.
• Don’t expect to get a different deal if you’re already a Verizon Fios customer. Unlike video services recently launched by Dish/Blockbuster and Comcast, this one is explicitly being offered beyond the 13-state “footprint” Verizon has built out for its Fios pay-TV service. That is, you don’t have to be a Verizon phone or video customer to get the service. But it will be marketed as a complimentary option to Fios and, for the time being, Fios customers will end up paying the same price as non-Fios customers. My hunch: Something in the $10-a-month range.

The more I hear about it, the more I think this is going to be a Redbox subscription offer with a smallish, ancillary streaming service bolted on. Pretty much the way Netflix used to work when Reed Hastings started with streaming a few years ago.

That could morph into something bigger, later. But for now, I don’t think this one will keep Hastings up at night.

Speaking of which: Netflix reports quarterly earnings today. Think that has anything to do with the timing of this morning’s announcement? In any case, I’ll have live coverage after 4 pm ET. See you then.

Since launching in August, Belly has signed up 1,400 merchants in eight markets, and is adding an average of 100 more merchants each week. Additionally, it has more than 200,000 active users, who have checked into business more than 800,000 times.

The business draws a little bit from Foursquare, because it requires users to check in to earn points; and also draws a little bit from Groupon, because of its focus on local commerce.

But Jeff Jordan, a partner at Andreessen Horowitz, argued that Belly is not at all like Groupon. “It’s the anti-Groupon,” he said. “Groupon is doing lead generation through discounting. … What Belly is trying to do is loyalty.”

The difference, Jordan said, is that Belly doesn’t require merchants to offer discounts to get consumers to come back.

For example, a Chicago comic book store owner is letting shoppers punch him in the stomach; a Washington, D.C., Ben & Jerry shop is giving away a chance to eat ice cream with Jerry after 200 visits; and a barber is handing over the clippers to frequent customers, who will shave off his own beard.

Jordan, the former chairman and CEO of OpenTable and former president of PayPal, said there are four reasons why he was attracted to the start-up:

1. The management team: Founder and CEO Logan LaHive previously worked at Redbox, and before that, Pay By Touch, the biometrics payments company that raised $350 million in capital before failing.
2. Product execution: Jordan said both merchants and customers like the product. Merchants must install an iPad at the register, where consumers can check in to earn points by scanning a bar code from their phone or a loyalty card.
3. DNA of the investors: Before Andreessen Horowitz got involved, LaHive incubated the company in the offices of Lightbank, the VC fund created by Groupon founders in Chicago. Jordan believes that the one who gets to market fastest will win in this market. Belly has that in its DNA.
4. Connected retailers: Once retailers have an iPad in every store, there will be additional opportunities for Belly to roll out other services.

LaHive said the capital will be used to fuel expansion into new markets and to develop new services. To date, the company has raised $13 million.

Belly charges merchants $50 to $100 a month for the service, which includes an iPad, a case and lock for the iPad, marketing materials, and data and analytics to manage their business better.

Belly @ Berry Austin from Bellycard.com on Vimeo.

And that’s the explanation for last night’s stock swoon, which followed a solid-to-good Q1 earnings report from the video company.

Specifically, Wall Street doesn’t believe Reed Hastings’s prediction that his company will add seven million customers to its U.S. streaming-video service this year. For a couple reasons:

• That’s the same growth rate that Netflix had back in 2010. But back then, Netflix was growing from a much smaller base. At least as important: Back then, it had the subscription streaming-video business more or less to itself. Now it is facing competition from Hulu, Amazon and Comcast, with more — like a Redbox/Verizon service — on the way.
• Hastings says Netflix can pull this off, even though next quarter’s growth will be much slower than Wall Street was expecting. Netflix has a complicated explanation for this, involving “seasonality” and the size of the company’s subscriber base. Short version: Trust us, it will all work out in the end.

These are the kind of arguments that Hastings used to win, because Netflix was one of tech and media’s most amazing growth stories, and Hastings had the aura of a man who could see around corners.

But 2011 changed all that. Now, if Hastings tells Wall Street that he can see the future, he’s going to get plenty of pushback. Yesterday’s conference call was dominated by questions about his 2012 growth predictions. The first one set the tone: “Why are you so confident?”

That one will take about eight months to explain. Let’s see if investors are that patient.

But if Comcast wants to, it can change that overnight, as The Wall Street Journal’s Sam Schechner reported yesterday. The cable giant’s new content deals allow it to sell its stuff nationally, to anyone with an Internet connection, if it wants to.

Comcast insists publicly that it has no interest in doing that. Privately, its executives say the same thing. They say they can’t figure out how to market and support a $5-a-month digital subscription service to noncustomers and still make money.

What if they added more content and sold it for $8 a month, like Netflix does? “That still wouldn’t work for us,” one of them told me yesterday. “We can’t figure out how it works for Netflix, either.”

So if things don’t change, then Streampix will work primarily as an anti-churn tool for Comcast — a carrot they’ll dangle to keep current subscribers happy. And it may also keep a few of them from signing up for Netflix, or renewing the subscription they already have.

Which means it will join the growing number of Netflix killers that aren’t really Netflix killers, because they don’t have the same breadth of content, or are only available to a certain number of customers.

Over the last couple of years, Amazon, Hulu and Dish/Blockbuster have all launched Web video subscription services that offer Netflix-like services. But, so far, none of them have really gone head to head with Reed Hastings.

Later this year, though, Verizon and Redbox will begin selling their own Web video service, and the companies have been very clear that that one won’t be limited to Verizon customers.

And it will definitely feel like a competitive service. There’s a good chance, for instance, that movies from the Viacom-backed Epix pay-TV channel, which currently run on Netflix, will appear on the Verizon service, too.

So that’s one full-fledged (potential) Netflix killer launching this year. And another one that might turn into one, with a flip of the switch. That ought to keep the Netflix executives, and investors, occupied for a bit.

The two companies put out a press release without a whole lot of detail (below) but are holding a press conference shortly where we may be able to tease some more out of them. (Update: Well, that was a waste of 10 minutes. Verizon is also promising to make executives available for interviews this morning, but my expectations are now very, very, very low. Subterranean.)

Right now, all they’re really saying is that they’ll have video content, delivered over the Web and via mobile devices, and that consumers will be able to stream some of it and download some of it.

Roping Redbox into the JV — Verizon will own 65 percent of the company, and the movie rental service will have the remainder — makes sense, because it will give the unnamed service a digital-plus-physical option. Just like Netflix and Dish Network’s Blockbuster already have.

But while the big media companies are very happy to license some of their content to Verizon or any other player that wants to pay for digital rights, they are much less comfortable with Coinstar’s Redbox, and have tangled with that service in court.

Right now, for instance, Redbox has announced that it won’t work with Warner Bros.’ new 56-day “window” for new movies on DVD, and will buy discs from third-party sources instead of getting them directly from the studio. So it will be interesting to see how Warner Bros. and parent company Time Warner treat the new venture, and whether that dynamic plays out with other content guys.

VERIZON AND COINSTAR’S REDBOX FORM JOINT VENTURE TO CREATE NEW CONSUMER CHOICE FOR VIDEO ENTERTAINMENT
Joint Venture Will Offer the Best of Both Worlds – Physical and Digital – to All Consumers Nationwide

NEW YORK – Verizon and Coinstar, Inc. today announced the formation of a joint venture that will create a new choice for quality- and value-conscious consumers seeking a simple and affordable way to access the video entertainment they crave. The venture’s services will offer all of the convenience, simplicity and value of Redbox® new release DVD and Blu-ray Disc® rentals combined with a new content-rich video on-demand streaming and download service from Verizon.

The joint venture plans to introduce the product portfolio in the second half of 2012. It will offer subscription services and more in an easy-to-use, flexible and affordable service that will allow all consumers across the U.S. to enjoy the new and popular entertainment they want, whenever they choose, using the media and devices they prefer. Additional brand and product information will be revealed in the coming months.

“When you consider the core elements the parties bring to this venture – our powerful brands; our national rental kiosk footprint; our anytime, anywhere network presence; and our mutual commitment to customer-focused innovation – it’s clear that Verizon and Redbox are a powerful entertainment team,” said Bob Mudge, president of Verizon consumer and mass business markets.

“Consumers rely on Redbox for the latest new release movies at a great value, and our joint venture with Verizon will enable us to bring them even more value by offering expanded content offerings and greater flexibility for how and when they enjoy entertainment,” said Paul Davis, chief executive officer of Coinstar, Inc. “This alliance is the result of a deliberate and strategic process to identify a partner who shares our commitment to delivering innovative solutions to consumers. We look forward to rolling out the shared benefits this venture will bring to consumers, retailers, and shareholders.”

This venture between Verizon and Redbox will create the kind of national multi-platform product that customers are demanding from video entertainment service providers. It will leverage Verizon’s industry-wide relationships with entertainment content providers, its advanced cloud computing technologies and state-of-the-art IP network infrastructure to distribute video on-demand content to its customers.

“The joint venture will combine the accessibility and value of Redbox with Verizon’s vision for a borderless lifestyle – where consumers easily accomplish what they want or need to do, on their terms, through the power of the network,” said Mudge. “Together, we are erasing old technology boundaries, freeing people to spontaneously enjoy the entertainment they want, whenever they choose, using the devices and media they prefer, at home or away.”

By offering instantly available online and mobile content with immediate access to physical media through rental kiosks, Verizon and Redbox will be uniquely positioned to deliver the best of both worlds – digital and physical – to consumers across the country.
The joint venture is a limited liability company with Verizon holding a 65 percent ownership share and Redbox holding a 35 percent ownership share at the outset.

Which means we’re in for an interesting game of chicken between Time Warner’s movie studio and the two rental services. And the result will be meaningful for Netflix, too.

Here’s where things stand: Warner Bros wants to double the “window” that keeps new DVDs away from rental services from 28 days to 56 days, a strategy that’s supposed to encourage would-be renters to buy DVDs instead. Netflix intends on going along with the plan and will be able to buy discs directly from the studio at wholesale rates.

Warner plans on announcing the new terms next week at the Consumer Electronics Show. But though I reported yesterday that Dish Network’s Blockbuster and Coinstar’s Redbox had signed on, the two companies — directly and indirectly —  say that’s not the case. Earlier today a Coinstar rep told me the company won’t agree to a longer window, and a person familiar with Blockbuster’s thinking now says the same thing.

If neither side backs down, then Blockbuster and Redbox would have a marketing advantage over Netflix, since the companies could boast about getting new movies before their rival.

But that assumes they can get their hands on the movies. That will be costly, and perhaps quite difficult.

In the past, Redbox has bought movies directly from retailers (Netflix also used to do the same thing in the service’s early days. But chains like Wal-Mart and Target have instituted buying caps on their discs  that are supposed to thwart that strategy. (Thanks, Janko Roettgers.)

Grab your popcorn!

A new deal between Time Warner’s movie studio and Netflix, Redbox and Blockbuster will double the “window” for new releases. That means the services will now have to wait 56 days after the discs first go on sale to offer them to their customers, instead of 28 days. [UPDATE: Redbox parent Coinstar now says they haven't agreed to a new deal; see below]

The move is part of Hollywood’s ongoing campaign to bolster flagging DVD sales, and sources tell me the new deal is supposed to be announced at next week’s Consumer Electronics Show in Las Vegas. Warner Brothers executives have already talked publicly about extending the current window.

This is the second time that Warner has been able to get the rental services to wait before distributing its movies.

In 2010, it struck deals with Netflix, and later Coinstar’s Redbox, to wait 28 days before renting its new discs. Coinstar and Netflix later landed similar pacts with most of the other big studios. (Coinstar did up end up in legal battles with Universal Studios and 20th Century Fox, which like this Web site is owned by News Corp.)

Two years ago, Netflix was able to argue that by delaying access to DVDs, it was able to get its hands on more streaming content, and lower prices for the discs it did buy. This time around, though, Warner won’t be granting any additional digital rights to the studios. It will simply be offering them the ability to buy discs in bulk, at a significant discount to retail pricing, like they already do.

Earlier today, news broke that HBO, another Time Warner unit, would stop selling its DVDs to Netflix altogether, but sources tell me the two moves aren’t directly related. Next week’s planned announcement is supposed to be tied to Warner Brothers’ continuing push for Ultraviolet, an industry consortium that’s supposed to allow home video buyers to watch their purchases on multiple machines, in multiple formats.

Reps for Time Warner, Coinstar, Netflix and Blockbuster parent company Dish Network declined to comment.

UPDATE: Coinstar is now commenting, via email. “The current agreement Coinstar has with Warner Bros. is to receive movie titles 28 days after their release. No revised agreements are in place.” The company’s current deal with Warner Bros. expires at the end of January; PR chief Marci Maule referred me to comments CEO Paul Davis made last fall about pursuing “workarounds” if studios try to extend their windows.

Alan Sklar feels it. The 61-year-old has stood behind the counter of Alan’s Alley Video in Manhattan’s Chelsea neighborhood for 22 years. Revenue is down, and his staff, which reached 10 a few years ago, is now about five. “If we pay the bills we’re happy,” he said.

Many nights, like last Thursday, are very quiet.

He lists the culprits. “Netflix (NFLX), Redbox and on demand,” he said, over Audrey Hepburn’s voice emanating from a television in the corner playing “Funny Face.”

“People like things being given to them. We don’t see as many warm bodies.”

Since the first video-rental shops emerged in the late 1970s, they have served as shrines to films and created new social spaces for neighborhoods, often reflecting their personalities. They drew cinephiles, rebellious teens seeking movies of which their parents might not approve, and budding young actors and directors who canonized them in their work.

Read the rest of this post on the original site

Avatar will be released in a bare-bones 2D DVD on April 22. Wold thinks Fox will want to have deals in place with Coinstar’s Redbox unit–and possibly with Netflix (NFLX)–ahead of the the release to spur additional purchases.

Read the rest of this post on the original site

Read the rest of this post on the original site

Whoa! Sorry, we may have gotten just a little over excited about Walt’s Personal Technology column this week. He responded to popular demand and submitted a full review of the magicJack. Yes, that magicJack. No one can ever accuse Walt Mossberg of not being a man of the people. So what did he find? Well, the little plastic USB dongle that ranks up there with rotisseries, Chia pets and The Clapper in the pantheon of hard-sell TV adds actually delivered on its promise. MagicJack connects via USB to a computer, and has a standard land-line telephone jack on the other end. Walt started it up, made some calls, and even tried out the customer service center, which turned out to be efficient and helpful. Among the few drawbacks were the need to use the phone number that comes with the device and the fact that it only works when your computer is on and connected to the Internet. Mossberg’s Mailbox was full to the brim this week with some pretty targeted questions about security, the grim future of the dedicated PDA and e-readers for libraries. As it turns out, running a virtual Windows machine on a Mac can lead to a very real virus if you aren’t careful. Katie’s piece at Mossberg Solution made sense of this week’s biggest question mark. What the heck is Google (GOOG) Buzz? She broke the new social network from Google down to its bare bones and explained some of the controversy surrounding how it decides who’s added to you Buzz list. The new social feature is now built into Gmail, but it seems the exact relationship between your Gmail contacts and Buzz is still being worked out. Katie nails it all with an expertly simple explanation of the service and controversies.

BoomTown started the week off with a little insider info about Micheal Dearing, the hottest angel investor you’ve never heard of. Dearing, a former eBay (EBAY) exec and current professor at Stanford’s design school, has been inside early on high-profile start-ups like Aardvark, Xoopit and Mixer Labs. Kara shared a meal with the start-up whisperer and got more out of him than most, even if he still kept pretty tight-lipped. Kara also shared some viral video love featuring some hardcore Avatar fans. We can’t tell if these live action Na’vi role players are kidding. Maybe we’ll ask their king, James Cameron, when he joins Kara on stage at the next D conference. Toward the end of the week, Kara posted about what may be the strangest love triangle of the modern era. The Facebook-Snickers-Betty White trifecta is so strange we can barely even comprehend the letters in it. It seems that Facebook users loved the Betty White Super Bowl ad for Snickers so much that they held a social media gun to Lorne Micheals’s head until he got the Golden Girl to host “Saturday Night Live.” The only thing that could unseat the Betty White triangle from weirdest social media moment of ’10 is the much rumored Barry White-KFC-America’s Next Top Model episode we’ve been hearing about. There: Rumor started.

MediaMemo led off the week with Weekend Update’s favorite sort of post. It was yet another beautiful e-mag concept, this time from Condé Nast’s Wired. The mag looked snappy, beautiful and functional–even if no one, besides maybe Stephen Colbert, has a device that can display it yet. Peter also covered the second instance of an emerging trend in the video rental business. It looks like Redbox, the ever-present rental kiosk company, has agreed to go the way of Netflix (NFLX) and keep recently released DVDs out of the rental pool in exchange for a cash break from Warner. Peter rounded things out with a post about Web TV service Hulu and the likelihood of a Hulu player for the iPad. Peter’s post explores the probability that an iPad Hulu would not be a free Hulu. This situation is pretty bounded and specific, but the deeper question is one facing a great many media companies right now. Will users be willing to pay for convenience of displaying a service on the iPad that they can get for free on there home computer, and by extension, will they pay by the app or pay for the content? Weekend Update can’t wait to see how that one shakes out.

Over at Digital Daily, John started early in the week with a quick peek at Microsoft’s (MSFT) Windows Phone, the new smartphone operating system from the maker of Windows Mobile and Windows Vista. As it turns out, Windows Phone looks pretty slick. The interface isn’t a shrunken version of the desktop OS, which is a very good thing. Midweek, John scaled a mountain of tweets to report from the very top. It seems that Twitter’s traffic has grown over 1,000 percent since last year, according to comScore’s (SCOR) January report. It may now be impossible to shut the flock up. To button up the week, John covered a decision by the Federal Trade Commission that allows Google to buy and sell power wholesale, just like an energy utility. Google execs insist that the move doesn’t signal their intention to enter the power arena as a utility. They just want to buy power like anyone else. After all, electricity is the raw material of Googling.

We’re so confident that you’ve enjoyed this Weekend Update that if you aren’t 100 percent satisfied, you can send it back for a full refund of your purchase price, no questions asked. You can look for all your favorite AllThingsD accessories next week. John, Peter Kara and Walt will be back to ship top-quality content directly to your door at no extra charge. Top quality, easy to use and in a variety of colors, there’s something for everyone at AllThingsD.

And now back to your regularly scheduled program.

The movie studios have worried that Redbox’s $1-a-day rental model, which now accounts for nearly one out every $5 spent on DVDs, undercut every other revenue stream they had. But several big studios–including Sony (SNE), Lionsgate (LGF), Disney (DIS) and Paramount, a unit of Viacom (VIA)–have figured out how to live the company.

Meanwhile, three others–Time Warner’s (TWX) Warner Bros., News Corp.’s (NWS) 20th Century Fox and GE’s (GE) NBC Universal–have been fighting Redbox in court.

Make that two others. Warner Bros. just announced a settlement with Redbox. And given Warner’s size and clout, you have to wonder how much longer the two other studios will need to keep fighting.

This settlement looks an awful lot like the one that Warner and Netflix agreed to earlier this year. Which is to say: Warner got pretty much what it wanted–protection of its 28-day DVD sales “window”–and the other side argues that it’s okay, really.

The theory is that by giving up the ability to get movies to consumers right away, Redbox saves money on the DVDs it does get and will have access to a wider selection. Redbox also says this will help the company if its wants to get into digital distribution. Though unlike Netflix (NFLX), Redbox is a long away from being a plausible player in digital.

But make no mistake. This is a costly window and one that Redbox wouldn’t agree to unless the studios had regained the upper hand. From Pali Research’s Rich Greenfield, via a clairvoyant note (title: “It’s Not Easy Being Redbox, with 2010 Set to Get Even More Challenging; Provides Hope For Movie Biz”):

While Redbox management declined to answer a question related to whether there business would be impacted by 10% from a 30-day window (that Redbox agreed to and stopped pursuing workarounds), we believe 10% is far too low. Redbox relies on the new-release business, if it did not, it would not be suing three studios. We suspect the impact is closer to 35-50% than 10% (albeit Redbox’s cost per DVD would come down), particularly as once a window is established the studios will spend heavily to hammer home to consumers that movies are available other places before Redbox (which generate higher gross profit dollars to the studio per transaction than via Redbox).

Release:

WARNER BROS. HOME ENTERTAINMENT AND REDBOX ANNOUNCE A MULTI-YEAR DISTRIBUTION AGREEMENT

Companies Agree to 28-Day Window for DVD and Blu-ray Titles

BURBANK, Calif. And OAKBROOK TERRACE, Ill, February 16, 2010 – Warner Bros. Home Entertainment Group and redbox today announced a new multi-year distribution agreement that will make Warner Bros. new release DVD and Blu-ray titles available to redbox customers after a 28-day window. The agreement also marks the end of the lawsuit that redbox filed against Warner Home Video in August 2009.

“We are very pleased to have had the opportunity to sit down with redbox and negotiate an arrangement that benefits both parties and allows us to continue making our films available to redbox customers,” said Kevin Tsujihara, president, Warner Bros. Home Entertainment Group. “The 28-day window enables us to get the most from the sales potential of our titles and maximize VOD usage.”

The new arrangement provides redbox with reduced product costs, sufficient quantities of product and optimal stock levels four weeks after street date as well as extends redbox’s access to Blu-ray titles, which redbox is currently testing in select markets. The agreement also provides Warner Bros. the opportunity to maximize the sales of new release titles as well as video on demand and other forms of digital distribution.

“This agreement enables redbox to fulfill our commitment to providing consumers affordable and convenient home entertainment,” said Mitch Lowe, president, redbox. “By agreeing to a delayed release date, redbox can now acquire Warner Home Video titles at a reduced product cost, preserving value for our consumers and increasing customer access to Warner titles at redbox locations nationwide.”

Warner Home Video and redbox will be implementing delayed availability during the month of March and will reach a four-week window by March 23 with the release of The Blind Side. The new agreement will run through January 31, 2012. Redbox has also agreed to destroy Warner Home Video content following its lifespan in kiosks.

“The 28-day window for redbox balances the economics of our relationship while continuing to offer great value to their customers,” said Ron Sanders, president, Warner Home Video. “This accord establishes a mutually beneficial relationship that will foster an ongoing and productive partnership.”

Warner Bros. is currently a leader in many home video categories including total video (DVD and Blu-ray combined), Theatrical Catalog video, TV on DVD, and Blu-ray and will ensure the DVD rental company access to sufficient quantities of Warner Home Video titles including The Time Traveler’s Wife, The Box, The Informant!, Where the Wild Things Are, The Blind Side, and Sherlock Holmes.

As Business Week reports, first Target (TGT) and now Wal-Mart (WMT) have imposed strict limits on the number of DVDs any one customer can buy at one time. That’s going to make it harder for DVD kiosk rental service Redbox to get around the refusal of some studios–including Warner Home Video, Universal Studios Home Entertainment and 20th Century Fox–to sell new releases directly to the company, which rents movies for a dollar a day. Redbox is in litigation with all three studios over the issue.

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It’s important to remember this whenever you see stories about Hollywood’s resurgence, measured by box office receipts. Because box office receipts don’t do that much for Hollywood’s bottom line–that’s the role of DVDs.

It’s also important to remember this when you see stories about Hollywood’s conniption fit over “windowing” and the lawsuit/hardball deal combo the studios have used with Redbox and Netflix (NFLX). Because the studios’ desire to wring every last penny from DVDs is what’s driving those moves.

Ditto for Hollywood’s desire for a 3-D boom: The studios are in desperate need of a new revenue stream to replace the disappearing discs.

So here’s the one-sentence story I promised, which illustrates the collapse. It comes via Edward Jay Epstein’s dissection of MGM’s blowup, published on Defamer (nice get!):

In the US alone, MGM’s net receipts from DVDs fell from $140 million in its 2007 fiscal year (which ended March 31, 2008) to just $30.4 million by 2010.

That clarifies things, no?

Yes, you can add plenty of caveats if you’d like. For instance, MGM has been more or less dormant except for its Bond films the last couple years, and studios rely on new releases to juice DVD sales. And the DVD slump hasn’t hit all studios equally–Disney (DIS) and DreamWorks Animation (DWA) have done less poorly, because parents still need to buy stuff to occupy their kids.

But that’s still a staggering 78 percent drop in a couple years. So even if you’re running a studio whose DVD sales don’t look that bad, you’re looking at plummeting sales. Scary stuff.

Netflix (NFLX) has agreed not to rent the Time Warner (TWX) studio’s movies for the first 28 days after they go on sale. In return, it will pay the studio a reduced fee when it does rent the discs, and will get more movies to offer via its growing Web streaming service.

Hard to get a very good sense of the deal because no dollar signs have surfaced so far. But the broad strokes sound good for both sides: Warner gets a big distributor to help it protect its retail sales for a bit longer, and Netflix gets to reallocate the money it spends from discs to digital.

Here’s Ted Sarandos, Netflix’s Hollywood emissary, via Reuters:

Sarandos declined to comment specifically on the economics of the deal but said it represents meaningful savings in terms of what it spent on Warner’s physical discs in 2009. He said, however, Netflix was reinvesting those savings in streaming.

“On a net basis in 2010, we’re growing our spending on the studios even if we are saving on physical DVDs,” he said, adding he expects this trend to continue as more and more customers seek movies through its streaming service.

“In 2010, Netflix will spend $600 million on postage,” said Sarandos who envisions “moving that entire bucket of spending to Hollywood and out of the post office.”

Note that this is exactly the agreement that Warner and other studios have not been able to strike with Redbox, the upstart rental outfit, which has led to a legal fight.

And it helps Netflix answer a question I hear more and more often these days: When will it be able to expand its selection of digital movies, which right now remains just a fraction of its physical catalog?

I’ll be able to ask CEO Reed Hastings that question myself on Friday during an interview at the Venetian Hotel in Las Vegas, where the All Things Digital team is gathering for the annual Consumer Electronics Show. You can listen in to what Hastings has to say at CES via a Web-streaming offering of our own Friday afternoon. Some details here, and more to come.

And in the blue corner, our challenger, hailing from the suburbs of Atlanta….A virtual unknown to consumers, you may have encountered one of its nearly 3,800 blue Blockbuster Express kiosks. This company grew up as National Cash Register, let’s here it for NCR!”

Okay, so this little rumble may not be as exciting as we’ve made it out to be. But after NCR (NCR) acquired 1,300 DVD machines through the acquisition of venture-backed start-up DVDPlay, it’s clear Coinstar (CSTR) and NCR will be slugging it out toe-to-toe for the right to rent DVDs for $1 a night in supermarkets and convenience stores.

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Olson sees several trends working in the company’s favor:

• DVD rental kiosk market is gaining share from traditional retailers like Blockbuster.
• Internet delivery likely still 3-5 years from going mainstream.
• Consumers shifting to DVD rentals from purchases due to low fees from Redbox – $1-a-day.

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If the medium was the message in yesterday’s zeitgeist, today’s “message transcends the medium” is a whole new mindset. It’s a brave new world out there, and AllthingsD didn’t fail to help make sense of it this week.

Boomtown was abuzz with the latest conversation from an Internet publishing sensation. Trip Adler, CEO of San Francisco-based Scribd, spoke to Kara about all things text and what its like to share a niche with giants. Speaking of giants, Boomtown was in Seattle this week, peering through everyone’s favorite Windows. While there, Kara caught wind of CEO Steve Ballmer’s embrace of the “new efficiency” by way of some executive belt-tightening. And in a followup to the near-viral “Louie Swisher loves Redbox” video, Kara wrote about a legal slap-fight between the DVD rental kiosk group and Fox.

While Fox was busy giving Redbox a black-eye, Digital Daily covered blows from a different kind of palm. It seems that Palm’s new mobile darling, the Pre, is a little over-abundant on store shelves. An 11 week-deep glut of the device may indicate tough times ahead for the smart-phone contender. If one plucky contender wasn’t enough, Digital Daily also covered IBM’s release of a LotusLive iNotes. This mail, calendar, and task management solution takes aim at a market currently in Google’s crosshairs. Finally, the week wouldn’t be complete with out a good Apple prognostication. John closed things out with some FCC documents that indicate a new wireless mouse and keyboard offering from the crew at 1 Infinite Loop. The logical jump is that the new input devices might be designed to complement a newly refreshed line of desktops.

John had new Macs and Peter had old tricks this week, specifically of the Kindle kind. In a settlement with the now-famous “1984 kid,” Amazon sealed up some of the holes in its policies about removing books from its Kindle devices. Now it’s most certainly against their policy to remove data…except when it isn’t. In a similar vein, more details surfaced about an upcoming e-publishing venture from Time that aims to put the content genie back in the bottle, Hulu style. The concept is to create a clearinghouse for magazines online and take back control of content and advertising dollars. Just in case we were beginning to think that there is always digital strength in numbers, Peter covered Comcast’s squashing of a rumor that it was looking to acquire a stake in NBC. Just the hint of such a move sent Comcast’s stock on a temporary tumble.

Walt was a personal technology machine this week with new additions to both the personal technology section and Mossberg’s Mailbox. And if that weren’t enough, Katie covered an important countertrend in personal tech that really turned some heads.

The personal tech feature of the week was the HTC Hero. This latest offering from the veteran Taiwan phone manufacturer features its most robust customization of the Android platform yet. Walt gave it high marks and placed it squarely among the Blackberry-Palm-Apple pantheon.

Walt checked the mailbox this week and answered some serious questions about the rise of the touchscreen laptop, the finer points of OS X and the iPhone OS, and tried to let a Vista Ultimate user down easy about the limited options for an easy upgrade to Windows 7.

Katie brought her A game to The Mossberg Solution with a succinct and poignant analysis of HP’s new growth model. The new Photosmart All-in-One with “Touch-Smart Web” bucks the current trend of photos and documents for digital display and tried to put consumers back in the printing game. The new printing experience uses a robust touchscreen and Web interface to allow printing of pics straight from the Web without a computer ever being involved. While she did have some good things to say about the printer’s apps and interface, HP’s overall strategy left her underwhelmed.

Whether you want to be the first to know when “that tablet” finally arrives or are just into the best coverage from the industry that is changing the world, there is no better homepage for all-things-tech than AllthingsD.

In the ongoing fight between Redbox–which rents DVDs from kiosks for $1–and major Hollywood studios, 20th Century Fox Home Entertainment just filed a brief to dismiss Redbox’s lawsuit against it.

Said Fox in a statement:

“Redbox’s legal claims are fatally flawed. Fox’s filing today makes clear that, in the end, the case is all about Redbox’s refusal to make a business deal on general terms similar to those paid by others in this industry. Instead, Redbox has insisted that Fox sell DVDs to them through distributors, on the date they demand, at the price they want to pay. Unable to get the terms it wanted at the bargaining table, Redbox instead decided to file this meritless lawsuit.”

In a statement, Redbox president Mitch Lowe responded to the filing by stating that Fox was anti-consumer.

“Twentieth Century Fox continues its pursuit to prohibit consumer access to new release DVDs at affordable prices…Redbox remains steadfast in our commitment to protecting consumers’ rights and to providing our customers the DVDs they want, where they want and at the low price they want.”

In two briefs filed this afternoon, refuting Redbox’s allegations, Fox is asserting that it has not refused to provide DVDs to the outfit and has tried to negotiate a deal.

Under contention between the two are the price and terms of when DVDs of hit movies can be released to Redbox.

Redbox has asserted that Fox is violating antitrust laws and copyright misuse in not selling DVDs to the company.

Fox denied that claim in the brief, noting that Redbox simply did not want to pay up in order to get certain DVDs on the “street date,” as do other retailers.

Fox is one of three studios that have become embroiled in lawsuits with Redbox.

Located in Oakbrook Terrace, Ill., and is wholly owned by Bellevue, Wash.-based Coinstar (CSTR), Redbox is seeing strong rental growth due to its $1-a-night price for first-run movies, which the company distributes via its 15,000 freestanding machines in supermarkets and convenience stores, as well as in big chains like McDonald’s (MCD), Wal-Mart (WMT) and Walgreens (WAG).

Its fascinating legal battle with the studios centers around the issues of steep discounting, release windowing and the price for premium content.

Redbox recently sued Warner Home Video, owned by Time Warner (TWX), for denying it the opportunity to buy DVDs without being required to wait a month or more to rent them out.

It has previously gone after NBC Universal’s Universal Studios Home Entertainment, owned by GE (GE) and Fox, a unit of News Corp. (NWS), for similar release restrictions.

The trio’s movies make up 40 percent of the DVD rental market.

In its brief today, Fox noted that it was willing to sell to Redbox directly, rather than via wholesalers, but that talks collapsed over pricing issues.

And while some studios are holding fast to fighting price declines represented by consumer-friendly, idiot-proof tech solutions like Redbox, others are not.

Redbox has inked deals with Sony (SNE); Lions Gate (LGF); Paramount, a unit of Viacom (VIA); and also gets movies from Walt Disney (DIS).

Here are two briefs filed by Fox in U.S. District Court in Delaware, the first, a motion to dismiss the lawsuit by Redbox, and the second to transfer venue to California:

FINAL Opening Brief in Support of Fox’s Motion to Dismiss

Redacted Transfer Venue Brief

(Full disclosure: Fox is owned by News Corp., which also owns Dow Jones, owner of this site.)