Warner Brother Deal Hurts Redbox, Helps Blockbuster
After much hemming and hawing -- and lawsuits -- kiosk movie distributor Redbox has agreed to delay Warner Bros. releases, making the company easy pickings for Blockbuster its new kiosk rival.
What does this mean? Rival Blockbuster, who I said could save itself with kiosks, can finally make a dent in Redbox's hold on the market -- and essentially eliminate any benefit from Redbox's head start.In a major concession, $1-per-night-DVD kiosk company Redbox Automated Retail has signed a deal with Warner Bros. agreeing not to offer the studio's newly released DVDs until 28 days after they go on sale.
Redbox's reversal is a major blow to the company, which had argued that providing its customers with movies the same day they go on sale was critical to its fast-growing business.
In August, Warner became the the third major studio, along with Universal Pictures and 20th Century Fox, to demand that Redbox agree to a sales-only "window" for several weeks after new films debut on DVD. All three studios argued that low-cost rentals undermine more profitable DVD sales, driving an overall decline in home entertainment revenue.
Redbox sued the three studios, alleging that they didn't have the right to order distributors not to provide movies for its kiosks. It has dropped its suit against Warner Bros.
Both Netflix and Redbox have had to make concessions to the major studios, delaying the release of films so Hollywood can try to rebound DVD sales -- efforts which, most critics agree, aren't going to help.
Regardless, if Blockbuster moves quickly, it can exploit the Redbox's loss. The startup has already spent the past year legally fighting the major studios, spreading itself thin. When the major studios come calling, Blockbuster has the clout from its main stores to negotiate with them. If Blockbuster is going all in on the kiosks, this is the time.