Redbox Still Using ‘Workaround’ Strategy To Get Fox, Universal DVDs Despite Warner Deal
Redbox “will continue to procure” Fox and Universal DVD and Blu-ray movies “through workarounds in the week they are released for sale,” Redbox President Mitch Lowe said Wednesday. The previous day his kiosk-rental company said it signed a deal with Warner, ending Redbox’s need to spend a great deal of money getting new Warner releases from companies other than the studio and authorized distributors.
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Redbox sued all three studios last year after they took steps to bar distribution of their new releases to Redbox unless the kiosk company agreed to observe about a one-month window before making them available to the public. The suit against Warner was filed in August in U.S. District Court in Wilmington, Del. (CED Aug 20 p5) and was ended by the companies’ agreement.
Lowe declined to comment on where any negotiations stand with Fox and Universal. The Warner deal takes effect next month and runs through January 2012. Redbox agreed to honor a 28-day window on new Warner releases. The agreement, similar to one last month between Warner and Netflix, seems to give the studio what it wanted all along. Executives at Redbox’s parent company, Coinstar, said last week the work-around to get new releases from the three studios was expensive (CED Feb 16 p8). The issue “may have decreased revenue in the quarter by as much as $15-25 million,” Coinstar said. The strategy “typically cost us an incremental $1-2 per DVD due to increased supply chain costs and higher retail prices,” it said.
"Ideally, we would like to make all titles available on the street date,” Lowe said of the deal with Warner. “However, this agreement enabled us to best fulfill our commitment to consumers.” His company now can “ensure availability in sufficient quantities of Warner titles at Redbox locations at an affordable price,” he said. Redbox also “now has the ability to acquire standard definition DVDs and Blu-ray at a significantly reduced product cost,” and the deal “greatly reduced the quantities of titles acquired through alternative distribution channels, allowing us to better navigate restrictions and focus our resources” on acquiring Fox and Universal titles, Lowe said. The Universal movie Couples Retreat “was one of Redbox’s top five rentals during Valentine’s Day weekend,” he said.
"The 28-day window enables us to get the most from the sales potential of our titles and maximize VoD usage,” said President Kevin Tsujihara of Warner Brothers Home Entertainment Group. Redbox will start holding off on in March on making Warner movies available and “will reach a four-week window by March 23 with the release of The Blind Side,” the companies said. Redbox said it also agreed to destroy Warner video content once it’s used in kiosks. Other new Warner releases that Redbox will now be able to obtain directly from the studio include The Time Traveler’s Wife, The Box, The Informant, Where the Wild Things Are and Sherlock Holmes, the companies said.
DVDs still account for most of Redbox’s business. The company said it’s testing Blu-ray in some markets.