Money Matters, Simplified.
Warner Bros., Redbox endorse DVD deal
by Ishita Sood - February 17, 2010 - comments
The new plan makes consumers rent DVDs soon after its theatrical run is over. Also, Warner will be supplying more copies of its DVDs and Blu-ray discs to Redbox. The deal comes after a six-month legal battle and is expected to run until 2012. Redbox will be paying Warner $124 million during this period.
Warner Bros. has struck a deal with Redbox Automated Retail, making the rental-kiosk chain to rent DVD titles only after 28 days of their release.
The settlement is a threat to competitor Netflix Inc. which had agreed last month for a 28-day delay on new Warner releases.
Redbox, a DVD kiosk operator, rents DVDs for as low as $1 a day. Its kiosks are located outside supermarkets and shopping centers across the US.
Under the new agreement, Warner has created a “release window” for kiosk DVDs and will supply the discounted discs to Redbox 28 days after their official release.
Kevin Tsujihara, president of Warner's home entertainment group, said that the deal will boost higher margin transactions.
“By agreeing to a delayed release date, Redbox can now acquire Warner titles at a reduced product cost, preserving value for our consumers and increasing access to Warner titles at Redbox locations nationwide,” said Mitch Stewart, Redbox president.
Redbox also deals with Sony, Lionsgate, Paramount and Summit Entertainment.
The deal
The new plan enables consumers to rent DVDs soon after the theatrical run is over. Also, Warner will be supplying more copies of its DVDs and Blu-ray discs to Redbox.
The deal comes after a six-month legal battle and is expected to run until 2012. Redbox will be paying Warner $124 million during this period.
“We want to move consumers to activities such as retail rental, video on demand and buying that have the best economics for the studio,” said Tsujihara.
“Those who want to pay $1 and are willing to wait, God bless them,” he added.
The new agreement also requires Redbox to destroy DVDs rather than resell them.
Previously, Redbox bought Warner's new-release DVDs from retailers like Wal-Mart, Target and Best Buy.
Redbox expects high revenue
Redbox, a unit of Coinstar, has secured more than 90 percent of its expected purchases for 2010. It expects first-quarter 2010 revenue in the range of $315 million to $335 million.
“One would think the other studios will get in line. Everybody's going to see if Warner Bros. starts doing better. I think Redbox will approach the other two guys and offer them the same terms,” said Michael Pachter, an analyst with Wedbush Securities in Los Angeles.
Redbox’s stock ended the day with an increase of 50 cents at $27.11. Shares had previously traded between $23.49 and $38.28.