Redbox talks to studios 'daily' about distribution

PHYSICAL: Pricing, windows are sticking points, chief of parent Coinstar says

By Danny King -- Video Business, 10/6/2009

OCT. 6 | PHYSICAL: Redbox, which has sued three movie studios over delayed DVD distribution windows to the largest U.S. movie rental kiosk operator, is in "daily" negotiations with studios in an attempt to reach a distribution agreement as the studios attempt to get the lawsuits dismissed, said Paul Davis, CEO of Redbox parent Coinstar, at a New York investors conference today.

Redbox also will continue to roll out variable pricing for items such as Blu-ray discs and videogames, according to Davis.

"It really gets down to price points and/or [distribution] windows," Davis said at the William Blair & Company Emerging Growth Stock Conference today. "We're trying to figure out a win-win situation. Both sides have to figure out a way to give a little."

Redbox has lawsuits against Warner Home Video, 20th Century Fox and Universal Studios Home Entertainment, all of which are have taken issue with Redbox's $1 a night rentals and are prohibiting the sale of their new DVD releases to kiosk operators such as Redbox until at least four weeks after their street date.

Davis estimated today that the three studios represent about 40% of Redbox's supply chain, which is consistent with Rentrak estimates of studios’ rental market share for the first half of the year.

Both Warner and Fox last week asked to have the lawsuits dismissed, with Fox painting Redbox in court papers as unwilling to pay the same amount paid by other retailers for the studio’s movies. Fox said in last week's court filing that it attempted to negotiate an agreement for direct distribution to Redbox, "but after months of negotiations, the parties could not agree on price."

Warner argued in court papers last week that its four-week release delay is a normal part of business operations and does not break any laws.

Redbox, which Davis estimates as having about 10% of the U.S. rental market share in dollars and 15% in units, is installing software in some machines that allow for variable pricing for items such as Blu-ray discs and videogames, which are being tested in Reno, Nev., and Wilmington, N.C. Davis added that Redbox will test a subscription model at some of its machines, though declined to elaborate.

With reporting by Susanne Ault