In the biggest surprise of the year, Redbox has now filed suit against Warner in federal court. This makes the third big studio Redbox has taken on, after their recent suit against Fox and their suit against Universal last year.
Redbox Automated Retail, LLC, filed suit in Delaware Federal Court against Warner Home Video on Tuesday, August 18, 2009, to protect consumers’ rights to access new release DVDs.
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Redbox filed the action in response to new distribution terms imposed by Warner Home Video that would prohibit redbox from providing consumers access to Warner Home Video titles until at least 28 days after public release.
With this lawsuit, Redbox now is taking on studios responsible for 50% of movies made. While this response was clearly expected, this whole fiasco is clearly all about PR. Redbox has even recently put up a new website at www.savelowcostdvds.com to keep the public informed and garner more support.
I agree that the studios are being greedy here, and probably should rethink their strategy, but Redbox knows they have the public on their side. It makes sense for them to sue any studio that implements these types of policies. As long as they prevail against Universal, they automatically win all cases, but that may not even matter if they win the war of public opinion.
“Warner Home Video’s actions come at the expense of consumers,” said Mitch Lowe, president, redbox. “Redbox remains committed to providing our customers the new release DVDs they want, where they want and at the low price they want. Standing behind our commitment, redbox will continue to offer our consumers access to all major new releases including Warner Home Video at our more than 15,000 locations nationwide.”
Of course, we know that Sony and Lionsgate have recently signed 5-year agreements with Redbox, and we believe that Disney may be close to signing as well. These deals have all included compromises that Redbox would have rather not made, but these 3 companies make up about 25% of the market, so it is good for Redbox to have them on their side here.
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The only “major” studio left is Viacom (Paramount), and I am sure we will hear where they stand very soon. And, as always, Inside Redbox will be here to keep you informed.
Time will tell whether the courts or public opinion will decide this issue. What do you think?
No more renting new dvd until 28 days later .:(
Ahh….Redbox and its new PR website. I guess if you can’t win in the court of law, then you try to win in the court of public opinion.
Another problem for Redbox: Because of the events of the past few weeks, the remaining studios that have no deal (Paramount, Disney) suddenly have much more negotiating power against Redbox. Paramount can ask for more, with the theat that it too will walk and leave Redbox out of 70% of the market.
There’s a third looming problem as well, one that’s just as big as the studio boycott. But I’ll touch on that later…
Ahh… Our favorite movie studio troll is back! I guess if the public doesn’t like you, you can always listen to yourself talk. (Sorry, couldn’t resist! Carry on…)
I agree with your assessment of bargaining power going to the studios – at least that is what they are thinking – but public opinion will likely prove to be the stronger power. One thing is for sure, no matter what happens here, the studios lose, plain and simple. If you don’t believe that, you are a fool and are ignoring history. The only way they can win is to give consumers what they want and change their attitude toward this whole issue.
I am looking forward to the “looming problem” though, maybe it will have nothing to do with movie studios or Blockbuster or greed, and I will be pleasantly surprised!
“I guess if you can’t win in the court of law, then you try to win in the court of public opinion.”
You say that as if it’s a bad strategy on Redbox’s part. It’s not.
One of the purposes of the lawsuits (like many lawsuits) is to encourage a negotiated deal on better terms. Public opinion can certainly encourage that. The studios are businesses which depend upon public goodwill, right?
I don’t think the strategy will work in any dramatic way, though, I don’t expect the studios to just say “never mind”. But ultimately deals are the best solution for both sides, and this might help speed things along.
@FoxWins: because RedBox is the first to employ PR firms to get their message out Really? Next you’re going to tell me, these studios don’t use PR firms at all. Is that spinning “If you have nothing to hide, you have nothing to fear” too much?
Hay FoxWins, afraid that your minimum wage job at Blockbuster is at risk?
doesnt redbox make enough money? sounds like they are the greedy ones. want their cake and eat it to, why should the movie studios give them any more than they already are. these law suits wont hurt the studios there are other outlets where they can get money, BB kiosk, dvdexpress, netflix, all which are alot better and have a better selection, i will admit it was nice getting up to 10 free movie codes a day to get movies to take home and burn my own copies, thanks redbox for part of my 750 movies that were free
If you were to put 20% Sony in all Redboxes then you would have to put in 40% Warner, 35% Fox, 40% Fox, 25% Paramount based on the True market conditions.
I’m not aware what the Big Studios have, but I know that Warner, Paramount, Fox and Uni are all way bigger than Sony. So my percentages are probably way too low.
I think I see a problem!
Sony – This gets back to negotiating power. Sony represents only 11% of the market. But Redbox was so desperate to get a deal that it allocated 20% to Sony and agreed to order a greater variety of Sony titles than it otherwise would have (Redbox would prefer to stock only the hottest titles).
Redbox is in a more dire position now, so I’m guessing that remaining studios like Paramount will get even better deals.
Mike – Why the personal attacks? It’s obvious that you people are obsessed with me. I guess the truth about Redbox hurts? I think that I’ve added to the discussion, but if you don’t want me here I’ll leave. Your loss.
Fox
I think the obsession lies with you……think about it. I think you owe it to everyone here to explain exactly why you exact so much joy from the idea of redbox failing. It might make people here better understand where you are coming from….then again..you may not care about that.
It’s just a simple request as you have gone too far to claim any non-bias. You have made your feelings clear. You are connected to something that redbox has affected in a bad way.
No personal attacks, FoxWins, just poking a little fun.
For the most part your viewpoints are welcome here. And, if you don’t really have some stake in Redbox losing here, I apologize. Your comments do often reek of you being a shill, though. You have absolutely nothing positive to say about Redbox here, and are just defending the studios actions.
Like I said before, I even agree with some of your points, but we both just have a different outcome in mind.
FOXWINS: “..If you don’t want me here I’ll leave. Your loss.”
PLEASE LEAVE. IT’S NO LOSS TO US.
HERE IS THE 2009 YEAR-TO-DATE BOX OFFICE PERCENTAGES BY STUDIO
STUDIO MARKET SHARE
View: YEARLY BREAKDOWN STUDIO LIST
2009 | 2008 | 2007 | 2006 | 2005 | 2004 | 2003 | 2002 | 2001 | 2000
January 1–August 16, 2009
Overall Gross: $6.908 billionRank Distributor Market
Share Total
Gross* Movies
Tracked 2009
Movies**
1 Warner Bros. 20.4% $1,412.5 24 15
2 Paramount 18.5% $1,275.5 13 10
3 20th Century Fox 13.1% $902.6 15 10
4 Buena Vista 12.4% $855.3 16 10
5 Sony / Columbia 11.3% $777.2 16 13
6 Universal 9.4% $647.6 15 11
7 Lionsgate 3.4% $236.3 8 6
8 Fox Searchlight 3.1% $212.9 8 5
9 Summit Entertainment 2.3% $160.0 8 6
10 Focus Features 1.5% $105.2 6 5
11 Paramount Vantage 0.8% $56.9 3 1
12 MGM/UA 0.6% $42.8 4 0
* In millions. ** # of total movies tracked that were released in 2009.
So you see the problem.
You cannot fit every studios wishes by giving 20% to a company that only did 11%.
Hard to fit 220% of contracts into a machine!!!
Redbox has mentioned that the “early bird gets the worm” when it comes to contract negotiation, so that explains why Sony has the highest market-share in their kiosks. Lionsgate made a similar deal, too.
I do agree, though, that these contracts are probably not the best thing for consumers, unless of course they mean Redbox staying in business and keeping rentals at $1/night.
I am definitely not a fan of the deals they have made the require them to destroy – instead of resell – their old inventory. There are always compromises to be made, though, and we just need to hope they work out for the best, or do something about it.
I can see why the other studios wouldn’t like this deal either!!!
Regardless of the early worm.
You lock yourself into a bad deal with a player in The NBA and you might not be able to sign the better free agents.
There is definitely a Finite amount of room in these machines and you can’t overpay for a lower player.
Regardless I hope things work out, but I can see why this is so messy.
Seems like what will happen if Redbox has to pull titles from a particular studio is that people will find out why (i’m sure Redbox will find a way for the kiosk to tell them what’s up) and it will draw negative attention to the studio itself. Right now people don’t generally know or care what studio makes what movie. I’ll bet if someone pulls their films from Redbox, people will start to care. I still think Redbox has just about all of the chips here… they give the public something they really want, their branding (primarily the huge red kiosks) is becoming more familiar and welcome all the time. Heck, you rent for a dollar and the late fee is essentially a dollar! The only way a movie studio will win in the court of public opinion is to give their movies away, which is of course absurd. And if one of the studios manages to win with a judge, they’re only going to rain down anger on themselves via the people. And the people are the ones with the money to spend. Not finding it in a Redbox won’t convince people to buy it in the store; if you wanted to rent it, you didn’t WANT to buy it.
I don’t know why these studios seek Redbox to postponed new releases for 1 month after street date, but redbox customers would just wait another month for the new releases. it doesnt matter, because there already months in delayed while still at the box office, another month is not going to do any harm, in the meanwhile there’s are plenty to do in daily lives and a month goes quickly. In addition the DVD rental quality is much better than online and some SAT/CABLE providers on demand movies, one of the reasons why kiosk rentals particular Redbox becoming very popular.
In addition, I hope none of the studios that have agreement with Redbox not to make them destory old DVD, this is insane and not ecological wise. Go Green!
I can’t quote the statistics, but it’s been in the news that DVD sales are way down in recent months (years even?). The studios seem to think it’s “merely” because people are renting from RedBox instead. In reality, it seems there’s a recession bordering on depression in the world today. Luxury items i.e. entertainment tends to take a big, early hit when times are tough.
I agree with others here that preventing rental will not lead to sales. It will just lead to unhappy customers who will steer away from certain studios when these consumers begin making those big, fat dollars of old.
I think it goes even beyond the economy. I think there are at least two additional factors here. 1) The video industry, like the music industry, is moving towards digital; and 2) consumers are also moving towards the idea of subscription services (Netflix) rather than ownership. Consumer preferences have changed and the DVD shelves at retail stores are shrinking. Redbox’s price point and convenient locations have positioned them for success. This is how they have bucked the trend. If the studios do end up delaying rental releases for one month, their DVD sales will continue to fall. Really no one wins in this scenario.
If Redbox loses and has to choose between raising prices or waiting 28 days, I would choose to raise prices, since I only use free codes anyways. I’ve been using redbox for about 2 years getting about a dvd per week and have yet to pay a single dollar…
BTW, thanks inside redbox!
That does not necessary you will continue to receive free codes. As far I understand this month could be the end of it.
@Carson – Free dvds each week over the past 2 years? Nice. You’re the king of the Redbox cheapos. Interesting though that you would prefer higher prices over delayed availability. My guess is that the kind of people who rent from Redbox would favor the lower price.
@Mark – Nothing wrong with creating a website for PR. However, it smacks of desperation. If Redbox had a strong case, then why start a PR campaign? And why now, after 2/3 of its case just got dismissed? Redbox knows it’s going to lose in a court of law and is thus trying to move the battle to the court of public opinion.
@Mike – Not a shill for anything. I started commenting a week ago, and there’s really been nothing positive to say given recent news. Like I said, Redbox HAD a great business model, one that was subsidized by the studios willingness to offer wholesale prices. All good things come to an end, and Redbox will soon have to choose between offering $2 rentals on day 1 or $1 rentals on day 30.
@FoxWins- still not willing to be honest about your motives
…and yes there is an anger or jealousy driving you…
@FOXWINS – You’re a sphincter. Please continue to expand and contract and expel the vile Redbox hate that permeates your interior.
You guys are funny. Alls everyone here sees (other then foxwins) is that yeah you get to rent a movie for a buck. Nobody here sees the effect Redbox is having on the entire video industry. First they are devaluing DVD’s saturating the market with previously viewed, They are destroying the movie rental business forcing store after store to close, They are devaluing the sell thru business. How is any of this good? So the studios make less money ok then they make less movies or cheaper movies. How can you honestly say that redbox growing at everyone elses expense is a good thing. I’m telling you that if you were trying to make your money at my expense I would not just stand by and let it happen. I applaude the studios for at least taking some kind of action to protect the movie industry from being destroyed all so red box can turn a buck. And if this is an honest forum all viewpoints would be welcomed and debated not called sphinctes that just shows a closed mind not an informed one!!!!! Everybody has a right to their own opinion and to voice it.Anyways the way I see it is Redbox has 2 choices change there model or don’t deal in day and date movies.
Right on brother!
Technology evolution !! Like it or Not. We Can’t Stop it, The FUTURE is Here. Eventually cell phone services will be free too, I don’t understand why mobile ph companies charges average of $60/mo. GPS services is already free. Soon it will be free digital airwaves for cellphones, high-speed internet, in bi-directional signal etc.. I know it will happen in my lifetime.
Redbox growing at other company’s expense IS a good thing…for the consumer. I can’t afford movies at $5 a pop (Blockbuster) and don’t want to subscribe to anything (Netflix). With Redbox I can spend a buck a night or maybe $3 and get a weekend full of movies. If Redbox loses, I’ll download it for free, and then nobody gets paid. Let he who has the better business model win. I’m behind Redbox all the way.
So If you don’t get “Your Way”, you will STEAL. Great morals!!!!
Absolutely Correct!
On the flip side…if Redbox wins, the studios could bring back tiered pricing…for example, charge $40 for a new release DVD….reducing the price back down to $20 in 30-45 days…even thought that’s an unlikely scenerio, if put in place it would force Redbox to raise prices,Slow down their growth and make them a non issue for the Bricks and Mortar stores…which by the way, add to the economy by paying employees to work at their stores.
Rev share, won’t work with the Red Box model….why would the studios take 37% of $1 when they can get 37% of $4 on a 2 day rental at Blockbuster…which by the way is increasing buys on Universal, Fox and Warner titles starting in Oct…..so as soon as the customer realizes they can’t get most New Releases at Redbox they’ll migrate back to bricks and mortar……
Paramount is already beginning to experiment with tiered pricing, although on weaker titles ( Dance Flick on September 8th and Imagine That on October 6th.) , pticed at $27.99 each through VPD. Dance Flick will be available at retail in early 2010 and Imagine That will be available at retail either 4 or 8 weeks after the rental release date ov October 6th.
I’ll be real curious how redbox will handle the circumstances they find themselfs in now. I don’t see how they can afford to purchase 50% of their titles retail operating on under a 2% profit margine. If they make $25 on an A title and have to purchase it at retail that slim profit margin they were working with soon becomes a negative # unless they slow their growth to deal with this. Then what comes into play is going to be the life cycle of these machines being around what 5 years, Having to pay employes to purchase-repackage-then stock these titles, and how the public is going to react to no more free codes and a more B-rated movie selection in the kiosk along with probabally not a very big copy depth of the A titles having to be bought at retail.I personally don’t believe whats left of the Universal Lawsuit is going to be settled anytime in the near future leaving redbox alot to deal with as far as staying viable. Even if Redbox does prevail the deals they are currently making now are still favorable to the studios. So win or lose these lawsuits I think Redbox loses. Paramont right now is the deciding factor on how bad those losing factors are going to be If they fall on the against side redbox is screwed if they fall on the for side redbox is screwed because paramount is going to get some favorable terms.
@Jon – Correct on basically everything. But be careful, the Redbox shills including Mike have no answer and will resort to personal attacks.
Until litigation is complete, Redbox will be stocking fewer copies of Universal, Fox, and Warner titles. Not only is supply limited via the retail channel, but having to pay higher retail prices means lower ROI and thus fewer copies.
Fewer copies means disappointed customers. These cheapos who have more time than money will stand in a 10 minute line only to find out that all three copies of Fast and the Furious are checked out.
Litigation also means that remaining studios have all the leverage in ongoing negotiations. Paramount can threaten to join Fox and others if Redbox doesn’t offer generous terms. It’s truly lose-lose for Redbox.
Also, Redbox knows that it’s going to lose in court. The timing of the PR website is telling. While the Universal lawsuit has been going on for many months, it wasn’t until 2/3 of its case got thrown out that Redbox decided to launch a PR website.
And once Redbox loses in court, it’s all over. Having to charge $2 on day 1 will cause the cheapos to flee. The comments on this blog are funny….people talk about waiting 20 minutes just to return a dvd. These people will do anything to save a buck, and the jump from $1 to $2 will be too much for them. Cheapos are not a loyal bunch.
If another company like Redbox came along and advertised 50 cent rentals a days, of course I would go for that cheaper deal, who wouldnt? Recognize the fact that people like a good deal. I am sure you are not an idiot and realize that the economy is hurting good hard working people (I take take it you are not part of this working class, eh?). Redbox is one of the very few outlets we have to do something fun for very little. I know I am not the only one who believes that if our $1 deals go away, we wont be putting that extra $20 we don’t have into buying new release DVD’s. I will either wait a month or others will *find* a way – I can assure you that. So, how are these companies going to be making more money in the end?? Wouldnt you think cutting the actors/actresses pay by a million might help? Just my thoughts.
let’s put it this way if a studio sells 1 and only 1 DVD they make $10.00 if a DVD rents out of redbox they get what about .20 cents so out of the 50 people who can’t rent a title because it’s not in redbox if just 1 of them buy the movie instead the studios break even. If 2 of those 50 people go buy 1 then they are ahead $10. Why would the studios continue to support a franchise that is taking their profit margines way down?
@RBFan – You acknowledge that you’re a thief, but I suspect that you’re a liar too. If you can’t rent for $1, then you’ll download illegally? If your integrity is only worth $1, then why not download illegally to begin with? Didn’t your parents instill any morals?
@Jody – Agree with you that there’s no loyalty to Redbox. The Redbox appeal is all about price, which is why its model will die at $2 (day 1). The model will also die at $1 (day 30) but for different reasons.
This is too bad. I am a Redbox customer because Block Buster screwed up more times than I can count. Within a 1 year period, they jacked their prices up 3 times, bungled the whole rent online-return to store options (since the online service and the stores had no way to “talk” to each other) and just generally provided poor customer service.
So if it comes to standing in line for a few more minutes, and not having to deal with inept clerks, while locking into a ever increasing monthly fee for ever decreasing customer service… I’ll take Redbox any day.
So it has nothing to do with being a cheap skate. Those who make this argument should take note that I ALSO have a Netflix account, and I STILL go to Redbox because
1. I use Netfilx mainly for movies I want to see on Bluray, or they are an older title such as a TV Series which I have missed the first time around.
2. The movies at Redbox are generally new releases, not in the Action/Adventure genre where Bluray shines and one’s which if I had to pay $5 for a rental, I may not ever rent.
3. The Redbox movies are convenient and I am more apt to rent on impulse while visiting the grocery store.
Plus, I can return the movie somewhere else if it makes sense, or I can reserve online and pick it up the next time I visit a store which I go to several times a week.
Bottom line, Redbox has developed an awesome business model that is convenient and easy to use without any standing fees, at a reasonable price.
So their reward for success is to have the Sudios now come down on them to try and quash this success?
If I DO happen to buy a movie, it will be beacuse it is a movie worth watching more than once, and if I am going to go to the added expense of buying a copy, it will undoubtedly be on Blueray.
But those who somehow see the shenanginas of the studios as anything more noble than protecting profit and screwing the middlemen who have figured out how to build a distribution network are sadly mistaken.
Warner studios is also going to limit sales to Netfilx and to BB as well. Why?? So I will purchase their movie instead??? Let’s face it, the only thing this is going to do is build animosity against the studio, and make it so that I wait several more weeks before seeing the movie.
The whole idea that making me wait 4 weeks is going to somehow entice me to purchase a copy at 20 times the price is absurd. This thinking makes the execs at GM look brilliant.
If you’ll notice the time stamps on these post you’ll also notice how they get rearranged to distort what people are saying. why not just let it be an honest discussion instead of trying to distort it?
So, my blogging software messes up the order of comments for a few days, and all of a sudden there is some conspiracy to distort what people are saying? Like I sit around here and waste time rearranging comments in some special order to confuse people. Yea, right.
Get real, Joey.
sorry just seemed odd my bad
Does anyone know if Redbox under their current business model makes a profit? I ask because I was under the impression that McDonald’s sold off all or a large part of their stock in Redbox. So I quess my question is if the Redbox model is feasible or not. If they are basically finding new investors to absorb their loss can it continue and maybe this is what the studios are concerned about. Basically Redbox puts all the brick and mortars under depleting a revenue source they can make a profit from and replacing it with a model that can’t support itself thus eliminating all revenue streams until VOD takes hold.
I have also noticed that on the scrape and rebuilds that have happened in my area McDonald’s did not replace the Redbox kiosks. It seems a shame since Redbox in very convenient and cheap. I now also hear that Walmart is thinking of pulling redbox. Probably feel its affecting their retail sale of their DVDs.
I hope Redbox is a workable model. I like my $1 rentals as much as anyone. However I am realistic that a business model can only be subsidized for a certain amount of time before the ramifications cause great financial distress. Just look at the government housing loans that put us in our current problem.
Just to clarify I heard some of this information while clicking through channels on tv during late night. So I could very easily have heard them out of context. That is the reason for my questions. As long as Redbox is profitable and pay the same prices as brick and mortar stores (or reached a fair deal with the studios, whichever is cheaper for them) I don’t understand the problem.
Well of course they make a profit, they’re still in business aren’t they? And they are constantly adding new kiosks for a total of around 18,000 kiosks to date. You don’t keep adding more kiosks if you’re not making a profit! They are totally owned by Coinstar now and have been for quite some time.
As for them still being in business because they make a profit that is a false assumption. Companies that are not making a profit tend to look for new investors to help prop them up and grow. And if you do loose money then you absolutely expand if your a young company with the investment capital. As a publicly held company most investors are looking for growth. The fact that you are growing allows you to loose money since you claim that the losses are due to cost of expansion.
Moot point however. It looks like Coinstar had a Net Income of 7 million for the second quarter between all entities. Very good during this economic downturn. I was simply concerned by McD seeming reluctance to replace the Redboxes in my area. Could be an oversight or it could be an early indicator of trouble with the partnership. I doubt it, but I it is a nagging question at the back of my mind.
If you look at Coinstar’s last statement, you end up getting a profit of about $100/Redbox per month (if you make all of the rest of Coinstar’s businesses at break even).
The reality is that the rest of Coinstar’s businesses are likely propping up the Redbox side of the business and the machines are running at a loss.
Which is why Redbox is in such a panic about either having to buy some of their product at retail prices or waiting 28 days to get their product. Because their business model simply does not work and they know it.
Their only hope is to drive enough video stores out of business so that people have no choice but to rent at a Redbox. And that is when you will see the price increase. This is a standard ploy and they have a short window to make it work. Otherwise you will see a lot of Redbox machines getting pulled in the next year or so as Coinstar files Chapter 11.
Wow, your post is written to fool the uninformed into thinking it’s a reasonable factual assessment based on their financials. But it’s just your opinions with zero supporting facts.
You look at Coinstar’s profit, and then simply assume Redbox is not generating any of it and in fact is running at a loss. What is your basis for making this claim? You say “likely”, which indicates it’s just a guess. And then you use that guess to assert Redbox is in panic and heading for bankruptcy. But you made the whole thing up. That’s like my squinting at the sun and using the fact that it no longer looks as bright to justify a prediction the world will end because the sun is burning out!
The Coinstar financials are no doubt complex. They need to amortize the high cost of the kiosks. My guess is you started looking at the financials and found them too difficult for you to figure out, and so gave up but decided to post what you wanted anyway.
All the information can be found if you type into your search engine- coinstar 10-k SEC filing. I belive they are operating on a profit margine of under 2%
But in my opinion Red box can not sustain with the business model the are currently using nor can they remain profitable with the deals they are making. Once again this is only my opinion
Yes, the 10K has a lot of information, but the information in Just a guy’s post after the words “if” and “assuming” is not in the 10K, it is assumptions he made in order to support his preconceived conclusions.
I have not had a chance to review Coinstar’s 10Ks and 10Qs, but typically a large public company does not give a detailed breakdown of financial results by division/product. So anyone looking for a statment like “kiosks made $xx profit each” will probably be disappointed. Sometimes better information is in the earnings call.
What would be weird is if they win against Universal and then lose against a different studio. You know same situation different outcome. I mean you would think it wouldn’t happen most likely. But I’m sure stranger stuff has happened before.