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Cable Technology Feature Article

February 17, 2010

Redbox to Hold Off Four Weeks on Warner Bros. Movie Rentals

By David Sims, TMCnet Contributing Editor

DVD rental kiosk chain Redbox won’t offer newly-released Warner Bros. movies for rent for a buck a night until a full 28 days after they’re released for sale, company officials said.
Warner Bros. movies make up about 15 percent of Redbox’s inventory, the company said.
“In return, Redbox gets guaranteed supply and better pricing than it was getting buying Warner titles in the retail market while the two companies were in litigation over the issue,” noted industry observer Eric Savitz, adding that “the litigation has now been settled.”

Redbox argued that it was being unfairly prevented from buying discs from wholesalers, and was forced to buy “new-release DVDs from retailers at higher prices to keep its kiosks stocked with new titles,” the AP reported. Redbox also agreed to destroy used DVDs instead of selling them for $7, as they had been doing.
Savitz said the settlement “established a model that the company can use to settle similar disputes with other studios -- in particular Fox and Universal, with which it also has been in litigation.”
Industry observer Stephanie Prange wrote that Redbox executives said one of the motivating factors in making this week’s deal with Warner to accept a 28-day window on new releases was “access to the studio’s Blu-ray titles.”
The kiosk company “plans to roll out Blu-ray rentals, which it has been testing for some time, by the middle of the year, likely at a higher rental price, according to executives,” Prange wrote: “Netflix already offers Blu-ray rentals at a premium, charging customers $1 to $3 more on their monthly subscription for renting titles in the high-def format.”
Netflix “agreed last month to a similar delay for Warner Bros.’ latest movies,” the AP reported.
Industry observer Erik Gruenwedel noted that “Warner’s determination to shore up packaged-media sales by delaying new releases to select rental channels also is an effort to create a digital window,” citing analysts.
“While the focus on yesterday’s apparent capitulation by Redbox to accept a 28-day delay for new-release movies from Warner Home Video would appear to benefit retail sales of DVD and Blu-ray Disc,” Gruenwedel said, “it also underscores the studio’s long-held fascination with video-on-demand and the format’s higher margins.”

David Sims is a contributing editor for TMCnet. To read more of David’s articles, please visit his columnist page. He also blogs for TMCnet here.

Edited by Marisa Torrieri