20th Century Fox has followed in Universal's footsteps by yanking its DVDs out of Redbox, the bargain-basement-priced DVD rental kiosks. Ars was tipped off by a reader that the studio, which has never entered into an agreement directly with Redbox, has ordered its wholesalers not to sell its DVDs to Redbox until 30 days after release. The move reflects the movie industry's fear and loathing of this new DVD rental market, reducing people's visits to places like Blockbuster and reducing the studios' ability to try and sell DVDs to customers.
Redbox is jointly owned by Coinstar and a subsidiary of McDonald's and acts as a self-service DVD distributor that operates kiosks at over 10,000 retail locations in the US (including McDonald's, Walmarts, Walgreens, and grocery stores). The kiosks, which each house more than 600 DVDs, rent out movies for $1 per day and sell used movies for $7. The company's Web-based inventory system makes it possible for consumers to select their movies over the Internet and reserve them in advance at a specified Redbox kiosk. The company has more kiosks than Blockbuster has stores, and each kiosk rents out an average of 50 movies per day.
The company does not, however, have any sort of partnership with most of the major movie studios. Sony is the only one that has recently struck a distribution deal with Redbox—the company otherwise obtains its DVDs through wholesale movie suppliers, such as Ingram and VPD, that have contracts with the movie studios. Movie giant Universal was the first to pick a bone with this arrangement, threatening to sever contracts with distributors unless they stopped providing DVDs to Redbox until 45 days after release.
Redbox then sued Universal for engaging in anticompetitive behavior and abusing copyright law, as well as trying to use coercive tactics to get Redbox to shell out 40 percent of its total gross revenues in exchange for new releases. Universal responded by countersuing, and a decision on the case is expected to land very soon. Fox apparently liked Universal's tactics, and is following suit with its own orders to distributors.
According to an unnamed source from Fox speaking to the Wall Street Journal, Fox said that it's still open to making DVDs available on their release dates if Redbox agrees to "better economic terms, such as sharing rental revenue," but that Redbox had declined the offer. Another source speaking to Reuters said that the company is prepared for a lawsuit from Redbox in response to its decision to withhold DVDs.
Officially, Fox's parent company News Corp. acknowledged that the reason for the move is because it believes outlets like Redbox are essentially ruining its business. "Having our [movies] rented at $1 in the rental window is grossly undervaluing our products," News Corp COO Chase Carey said on a conference call yesterday. "We are actively determining how to deal with it."
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