December 11, 2008

Video kiosks - Universal Challenges Redbox

The battle between Redbox and Universal escalates with "new acquisition strategies" employed by Redbox to get additional copies of videos in defiance of Universal Music. From Wall Street Journal.


Last weekend, one of the top titles in Redbox video-rental kiosks was "Wanted," the Universal Pictures thriller about a clerk turned assassin. But instead of rejoicing, Universal has been trying to block Redbox from selling "Wanted" along with its other new releases.

Though Universal had threatened to cut off Redbox's supplies of "Wanted" DVDs, the kiosk retailer had been able to get them anyway by tapping new channels. In October, Redbox slapped Universal with a lawsuit filed in U.S. District Court in Delaware, alleging the studio is violating antitrust laws and misusing copyright. On Friday, Universal asked the court to dismiss the case.

Universal is one of several studios that dislike the way kiosks such as Redbox sell and rent DVDs, claiming that its prices are too low and are hurting other DVD retailers. The spat between Redbox and General Electric Co.'s NBC Universal is part of a broader struggle in the industry to cope with declining DVD sales.

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Redbox operates 12,000 kiosks around the U.S., renting movies for $1.

DVD sales are likely to fall about 6% this year, according to Adams Media Research, cutting into what had been one of the most important sources of revenue for movie studios.

Redbox isn't the only kiosk operator, but it is by far the biggest. It has installed 12,000 kiosks around the U.S., compared with about half that a year ago. By comparison, Blockbuster Inc. has 5,000 U.S. stores. Because the kiosks are cheap to operate, Redbox rents movies for $1, making it a hit with consumers.

Blockbuster, which must rent and staff stores, might charge as much as $4.99 for the same rental. Last week, Blockbuster said it was testing renting some classic movies for 99 cents, because of factors such as the poor economy. It is also rolling out DVD kiosks of its own, starting with about 50 kiosks during the next few weeks at various retail locations such as convenience stores.

Big retailers such as Blockbuster typically give studios a portion of rental revenue on top of purchasing the DVDs they rent out. But Redbox doesn't cut the studios in on rentals.

Moreover, Redbox kiosks don't stock much of the niche, arthouse movies that studios like to promote, especially around Oscar season.

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Posted by staff at December 11, 2008 02:10 PM