Verizon and the rest of the cable/telco cartel have succeeded in extorting rents from Netflix, so now they have no need for an alternate service. A content play was never a natural move for Verizon. Much easier and much more profitable to simply shake down the two or three leading streaming services -- but until they were able to do that, having something like Redbox streaming was an important part of their threat.
Redbox streaming likely only existed to use as a threat: "nice little business you've got here. Pity if anything started happening to your deliveries and our company took all your customers."