Redbox Fights Back

After Universal Studios slapped the 45 day wait period on Redbox rental kiosks, the $1.00 per night DVD rental company dug in its heels and filed an anti-trust lawsuit against the studio.  According to the Redbox lawsuit, Universal blindsided them with an inflexible revenue sharing agreement which put all the profits in Universal’s pocket and left Redbox with all the expenses and penalties.  The revenue sharing plan forces the kiosk rentailers to wait 45 days after the public release of new movies before they can put them up for rent in their kiosks.  It also sets a limit of 8 copies of each movie per rental kiosk.  Furthermore, Redbox must trash all DVD’s once their rental term is ended.

In the past Redbox has sold these expired DVD’s to the public at a reduced cost.  Universal’s revenue agreement forces Redbox to loose this source of income.  In fact, all of the regulations in the revenue agreement reduce the choices offered to the consumer and cut into the rental company’s revenues.  Redbox claims that the revenue sharing agreement which Universal is attempting to force on them is a ploy to put the rental kiosks out of business.  According to Redbox, “60% of rental demand is satisfied in the first 45 days of a title’s release.”

President of DVD Play, Charlie Piper, has stated that Redbox is defending all rental kiosks.  He said, “They’ve done it for the whole kiosk business.”  His company has also been slapped with the same revenue sharing agreement by Universal Studios.  Piper says his company won’t wait 45 days.  They will purchase the movies upon release just like other consumers do and put them in their rental kiosks without any limitations.  A decision hasn’t been made on taking this matter to the courts by DVD Play.

The threats by Universal go beyond the rental kiosk companies to the wholesalers who supply movies to the kiosk companies as well as to retail stores.  If the wholesale places, such as Video Product Distributors and Ingram Entertainment, sell disks to the rental kiosks, then they will face penalties from the studio such as no longer receiving movies for sale.  They are also forbidding wholesalers to deal with Redbox.  This sounds an awful lot like biting your nose off to spite your face.  If they don’t continue to do business with the wholesalers, how do they propose to get their product in the market place?  The wholesale businesses don’t particularly care for Universal’s strong arm tactics but they have no choice but to go along with this major studio’s demands or risk loosing a large chunk of their business revenue.

The deadline for Redbox to sign the agreement has passed and it is yet to be seen what will come of this battle.  Copyright misuse is one of the complaints filed against Universal in the lawsuit.  The others concern two infractions against the Sherman Anti-Trust laws and attempting to disrupt contracts between business entities.  Redbox is asking for “an injunction prohibiting Universal from limiting DVD supply to Redbox, monetary damages and court costs.”  The question now is will the court make a decision before the rental kiosks are put out of business by the strong arm tactics of Universal Studios and other movie production studios which have now weighed in on the battle.  It seems to me that the wholesalers, rental kiosk companies, and consumers could do a lot of hurt to the big studios if the banded together.  Wise up Hollywood.  Your product is worthless if you have no market to distribute it to.

Source: Video Business: Studio Demands Kiosk Company Wait 45 Days to Rent DVDs