US telecom giant Verizon is teaming up with Coinstar, which operates Redbox movie rental kiosks, to launch a video service to challenge market leader Netflix.

Verizon and Coinstar said Monday they had formed a joint venture that will add an online streaming option to the 35,400 Redbox self-service vending machines located in grocery stores, McDonald's restaurants and other sites.

Verizon and Coinstar subsidiary Redbox said the subscription service will launch in the second half of this year.

"Our joint venture with Verizon will enable us to bring (consumers) even more value by offering expanded content offerings and greater flexibility for how and when they enjoy entertainment," Coinstar chief executive Paul Davis said.

Bob Mudge, president of Verizon consumer and mass business markets, said the venture is aimed at "freeing people to spontaneously enjoy the entertainment they want, whenever they choose, using the devices and media they prefer, at home or away."

Verizon will hold a 65 percent stake in the venture with Redbox holding the remaining 35 percent.

The Los Gatos, California-based Netflix, which offers online streaming and DVD delivery by mail, had 24.4 million US subscribers at the end of December, up from 23.8 million at the end of the previous quarter.

Netflix has expanded to Britain, Canada and Latin America over the past two years.

Netflix shares gained 2.23 percent to $129.25 on Wall Street on Monday.