Redbox Lawsuits: The Protection of Consumers' Rights

The Battle of Hollywood, Profits, and Antitrust Laws

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Redbox Automated Retail, LLC, subordinate company of Coinstar, Inc., provides $1 new release DVD rentals to the public. Available at convenient and grocery stores, Wall-Mart, Walgreens, and McDonalds, Redbox has more than 15,000 self-service kiosks nationwide since 2002.

In August 2009, the LA Times records the revenue of Redbox increasing 110 percent in the second quarter to $188.9 million. Amidst the economic crisis, consumers flock to the kiosks for a cheap fix. Sony Pictures Home Entertainment (SPHE), realizing the value of Redbox, signed a five-year licensing deal in July, to earn about $460 million.

David Bishop, President of SPHM said, "The agreement supports two of our overall business objectives - increasing the availability of our titles and eliminating a key source of previously viewed product in the marketplace." The distribution agreement provides for SPHE new release, direct-to-video, and catalog titles to be in each kiosk.

Lions Gate Entertainment jumped on the Redbox bandwagon, cutting a $158 million deal. Lionsgate President and Co-Chief Operating Officer, Steve Beeks stated, "This agreement gives us tremendous placement for all our films and lowers the impact of low-priced previously-viewed DVDs being sold into the market, which we saw as a growing issue. We believe that this arrangement is a smart opportunity for Lionsgate in the current environment and a win/win for both companies." He believes Redbox will expand his company through an increase in the number of impulse rentals by adding more kiosks.

Although, executives from Sony and Lions Gate are worried Redbox is undercutting the sale of DVDs and profit from other rentals like Netflix and Blockbuster, they are in favor of new releases being available at Redbox the day they come out. Universal Pictures and 20^th Century Fox are engaged in legal disputes over a 45 day wait period and 30 day wait period respectively.

Released on August 17, 2009, Video Business reports that Redbox's federal antitrust suit against Universal was upheld, denying full dismissal of the claim. Copy write and tortuous interference, the attempt to disrupt another party's business relationship, were both dismissed. Redbox sued Universal last October over violating anti-trust laws in demanding a 45-day "vending rental window."

President of Redbox, Mitch Lowe comments, "The Federal Court's decision marks an important step forward in our effort to protect consumers' right to convenient, affordable access to new release DVDs at Redbox locations nationwide. We appreciate the Court's thoughtful review of this issue and look forward to pursuing our claim and protecting our consumers' rights."

With recent success against Universal, Redbox filled a federal lawsuit against Time Warner Home Video on Tuesday. Redbox is responding against the distribution term that prohibits vending rentals to customers before 28 days of a new release.

Adding perspective to the argument, the Fortune 500 list in 2009, places Time Warner in the lead of the U.S. Entertainment industry and holds the 48^th spot in the Top 1000 American companies with revenue of $46,984 in millions. News Corp., parent corporation to Fox, holds the 70^th spot in the Top 1000 and 3^rd in the industry behind Walt Disney. Revenue is at $32,996 in millions, increasing 1.81 percent from 2008.

The entertainment industry is the 51^st most profitable industry in the U.S. with a 10 percent decrease in revenue from 2008. It is estimated the industry will face losses from DVD sales of about $850 million. The Wall Street Journal reports that total revenue will fall to $12 billion according to Adams Media Research.

Lowe concludes, "Redbox remains committed to providing our customers the new release DVDs they want, where they want and at the low price they want. Standing behind our commitment, Redbox will continue to offer our consumers access to all major new releases including Warner Home Video at our more than 15,000 locations nationwide."

Citations:

Redbox press room

Redbox

http://redboxpressroom.com/#

Redbox revenue more than doubles, testing new pricing models

Company Town

Los Angeles Times

http://latimesblogs.latimes.com/entertainmentnewsbuzz/2009/08/redbox-revenue-more-than-doubles-testing-new-pricing-models.html

Sony Pictures-Redbox deal underscores value of bargain DVD rentals

Company Town

Los Angeles Time

http://latimesblogs.latimes.com/entertainmentnewsbuzz/2009/07/how-much-is-redbox-worth-to-the-hollywood-studios.html