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Confirming reports that have been circulating for a few weeks now, Redbox president Mitch Lowe acknowledged today that Disney has changed the terms of its agreements with Redbox and Netflix. Disney is now charging both renters higher wholesale prices on its titles.

Lowe declined to reveal the new terms, but the L.A. Times is reporting that Redbox and Netflix are now paying as much as $17.99 per new release title.

Lowe offered the following on the new terms:

“We did recently update our agreement with Disney, and continue to maintain a strong relationship with the studio . . . Each of our studio partnerships is unique. Disney has been a consistent partner since day one and we are proud to feature Disney titles day-and-date at our more than 26,000 locations nationwide.
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Is Disney, which has been cautiously supportive of the Redbox model in the past, changing its mind about the kiosk renter? Visit the comments and weigh in with your guesses at the Mouse House’s reasoning.
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(via Home Media Magazine)

18 Responses to “Redbox CEO Confirms Disney Agreement Update”

  1. Member [Join Now]

    That’s not too bad. At 1.00 a day they’ll make the money up in 20 days and start seeing profit. It makes the margin close (assuming steep demand drop offs) but it’s well within reason. If they consider this against the 28 days they are coming out with 8 days free.

  2. Visitor [Join Now]
    modsq [visitor]

    Don’t think they are necessarily changing their mind. They are just trying to milk a little more out of the only people Buying product.
    It’s obvious consumers are buying less and renting more so it’s a last ditch effort
    to keep the studios pockets lined before they face reality.
    In it’s present state the high volume, high dollar sales days are over, time to adapt and reinvent.

  3. Member [Join Now]
    Alan Smithee [8traxrule]

    Still a lot better than $99 VHS tapes.

  4. Visitor [Join Now]
    Alex [visitor]

    Now rumors are swirling that Lionsgate and Sony will be going with a window this summer. Paramount will also be going with a window in December this year if not higher pricing at distribution. Also both Warner and Universal will be altering their windows to 42 days. It’s going to be tough for Redbox being in a hits driven business and not having any hits day and date. Also correct me if I’m wrong but I thought I had read that Redbox on average rents a disc 15 times. If they are paying $17.99 won’t they be losing money on these. It obviously will mean less copies of disney titles Secretariet came in 17th for Redbox where the rest of the renters had it at 2nd.

    • Visitor [Join Now]
      Consumer [visitor]

      The average rental according to Redbox last quarter was around $2.18 according to their filing. So at 15 rentals you get around $33 which is within their guidance. A little thing was also in the article that said Redbox could wait 28 days and get the DVD’s for around $11. I look for Redbox to purchase some at $17.99 and then bring in a few more copies later at $11 to keep up with demand and on some titles not even bring them in until 28 days later.

      • Visitor [Join Now]
        Tee [visitor]

        Consumer, I hope your right but I’m not sure that’s how “flips” or “turns” is viewed. By the way your interpreting this they will have effectively rented each title an average of 33 times (not including “freebies”). I think that ($2.18) may simply be the average fee paid per customer, per transaction. Average rentals per title (rental=1 day) is around 15 give or take. I would venture to guess that they are averaging more like $16-$17 per copy.

        • Visitor [Join Now]
          Anton [visitor]

          Hasn’t Disney always been the most expensive studio for RB? Anyhow, your estimate seems about right. If RB is steadfast on paying only about $10, or less per DVD copy. I hear they aim for $7. That would imply that thier revenue per DVD must be about $20. So lets just say that they get DVD’s for $10. $20 revenue -$10 cost= $10 profit. I interpreted the 15 rentals as just (10 X $2.18) rentals, and (5 X $0) rentals.

          • Visitor [Join Now]
            Alex [visitor]

            this is actually even worse for redbox as Disney came out today and said that it will be full price for 42 days not 28. This will severely limit the amount of copies that redbox or netflix can bring in as I believe they will not do much more with these titles then break even. Also what about the smaller titles that only do 30 million at the box office or less. Just like when they were doing the work arounds they didn’t even bring in these titles because it wasn’t worth it because they couldn’t make the money back.

  5. Visitor [Join Now]
    Alex [visitor]

    Wasn’t Iger the one studio head who was comming out in favor of Redbox and Netflix. I would say that the other heads at Disney must not be on the same page or it’s one of those watch the hands not the mouth type things.

  6. Visitor [Join Now]
    Video Store Owner [visitor]

    Redbox will serve a purpose for a long time to come, but if all studios charge more for product or window them their revenue numbers will go nowhere but down.

  7. Visitor [Join Now]
    Video Store Owner [visitor]

    Brick and mortar stores make their profit off of selling those PV movies. The renting of the movie pays for the cost of the product. Redbox doesn’t have the luxury of selling its PV product.

    • Member [Join Now]

      Family Video has the opposite model and seems to be making a fortune. Rentals are cheap, kid movies are free, and everyone leaves with about 5 discs as opposed to 1 like Blockbuster customers. They keep classics for as long as they’ll play also and keep the profit per disc rolling in. It seems like a good idea and we’ll see how it goes in the future.

    • Visitor [Join Now]
      Alex [visitor]

      By the time redbox can afford to bring in any meaningfull copy depth most video stores will have already dumped these titles previously viewed or at the very least customers will have the choice at a buck rental or a five buck purchase on the Disney titles. I would think this will have a greater effect on redbox customers continually going to the box and not finding new releases.

  8. Visitor [Join Now]
    just my opinion [visitor]

    It’s halarious how this news came out and Redbox hurried to get the rumor out about a streaming service. First off this streaming service card has been played out for 2 years now and nothing has materialized. Last year they said it would be announced at the end of 2010. 4th quarter 2010 they said beginning of 2011. Now they say hopefully this year. The truth of the matter is that not one of the many rumored partners walmart,amazon or apple has any need or want to partner up with a coinstar and it would never happen. This is just investors trying to minipulate the stock and make a buck. Not just that but the studios are more interested in VOD and their own streaming services and turning redbox into a 2nd class citizen then giving them more access to content.

    It’s amazing how redbox management gets the rumors out in the press whenever something comes out like a Disney taking redbox to the cleaners on cost. I find it highly minipulative and borderline further violations of the SEC (probabally why all the class action lawsuits have been brought against redbox in the last couple weeks, what is it 7 or 8 now?) I think they are going to see alot of this stuff brought up in the court proceedings.

    All the bigger companies are coming out with their own streaming services and to take on redbox as a partner would be to take on a partner who is despised by the studios ie… windows, higher cost,etc… It’s not like taking on a partner it would be more like taking on an anchor.

    It is extremely unlikely any studio would be willing to license redbox their content for streaming unless it was a Netflix/Epix deal which redbox could not afford. They aren’t even going to be able to afford to stock more then 10 Disney titles in a box much less get content rights to stream unless it was the absolute bottom of the barrel content.

  9. Visitor [Join Now]
    Joe Schmuck [visitor]

    If Redbox only stocked 8 copies of a Disney DVD per machine, @ $17.99 per DVD, and multiply that by 30,000 machines, they would have to spend $34,540,800 just to stock ONE Disney title. And that does not even include BLU-RAY!