Video rentailers can either pay the wholesale cost (plus a little markup if you get it from a distributor) or pay a revenue sharing fee (usually 40-50 of the cost of the rental with a minimum of around $1.50).

Redbox refused to pay full wholesale cost.

Redbox refuses to pay proper revenue sharing.

They want to charge $1.00 for a rental instead. In order to do that, they need deals outside of what ANY other rentailers in North America is getting.

Is Redbox being shut out? Not at all. They are perfectly within their rights to buy product from Wal-Mart or Best Buy (just as those retailers are within their right to limit the number of copies a Redbox Rep can buy from each store).

In fact, buying from Wal-Mart or Best Buy on the day of release means they are getting a price that is better than most rentailers would get from their distributor. So what is the problem other than the fact that the price they would have to pay is still too high for them to make a profit?

Redbox wants special treatment. They want cheaper prices than Blockbuster (who buys more product than Redbox). They want cheaper prices than Wal-Mart (who buys more product than Redbox). This simply is not going to happen.

This court case is going no where and will cost Redbox/Coinstar a lot of money in legal costs.

Interesting…

“According to court documents, Redbox gets its movies from two distributors, Ingram Entertainment Inc. in La Vergne, Tenn., and Video Product Distribution, or VPD, in Folsom, Calif.”

“In its suit against Universal, filed on Oct. 10, 2008, Redbox said that the studio’s representatives approached the retailer with an offer: Under a “revenue sharing agreement,” Redbox could deal directly with the studio but would not be allowed to rent out Universal DVDs until 45 days after their release. When Redbox refused the offer, VPD and Ingram, under direction from Universal, refused to fill Redbox’s orders for Universal DVDs on Dec. 1, according to court papers. Redbox claims that Universal then expanded its campaign into a “group boycott” that now includes other wholesalers and retailers, such as Best Buy Co. Inc. and Wal-Mart. Some of these companies have canceled orders or limited the number of DVD copies they provide to Redbox. ”

http://www.law.com/jsp/article.jsp?id=1202434752365

4. Damage caused = The movies suck lately. Redbox competitors (B&M stores) are using the delay to their advantage with a marketing campaign “get it here first”. People naturally want it now, the damage is pretty obvious. Kiosk operators are NOT paying a fair price if they get a different deal than all the other rental companies.

3. Stupid decision, the only reason to do this is to try to put Kiosk operators out of business. They are targeting only Kiosk operators, unfair practice.

2. Obvious, they are the movie studios.

1. DVD market.

In other words, this is NOT:
John goes to a grocery store to buy bread. The price tag on fresh bread is $1 a loaf. John demands that the store sell him all the loaves of bread that come out of the oven for $0.50 a loaf.

This IS:
John goes to a grocery store to buy bread. The price tag on fresh bread is $1 a loaf. The store demands that John pay $1.50 a loaf and he can’t buy the fresh bread, only because he buys too much bread.

Big difference there.

Noone really knows what Redbox’s demands are, all we’ve heard on that front is from the guys on this site whose credibility has been proven to be very low. However, the fact that some of the studios have made deals with Redbox lends credence to the idea the Redbox is willing to negotiate and isn’t actually making unreasonable demands.