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Redbox caves, agrees to 28-day delay with Warner Bros.
Warner Bros. and redbox agree to a 28-delay on new releases at the discount DVD-rental kiosks; redbox-parent Coinstar's shares close 50 cents higher.
In a move that may benefit everyone but the consumer, redbox has agreed not to stock Warner Bros. new releases until 28 days after their release.
Similar to the deal Netflix recently struck with studios, the long-rumored and finally realized agreement also ends the lawsuits between Warner and redbox, and it paid almost immediate dividends, at least in the short term.
Now that redbox will be paying lower prices for Warner Bros. films, parent company Coinstar issued first quarter financial guidance indicating it expects to earn 8 cents to 14 cents per share on $315 million to $330 million in revenue in the first three months of this year,according to the Associated Press.
In the wake of the news, shares of Coinstar gained 50 cents to close at $27.11, the AP reported.
Redbox President Mitch Lowetold the L.A. Timeshis company made the move to better serve its customers, who now will have to wait longer to rent new movies for $1.
"We were not serving our customers by getting them enough copies of the titles they wanted," Lowe told the paper. "This seemed to be the best way to give our customers more copies and get a deal that made economic sense."
The Warner-redbox agreement lasts until 2012, and redbox said in a Securities and Exchange Commission filing Tuesday that it expected to pay the studio $124 million during that period, according to the Times. The move also most likely portends similar agreements with other studios, like Universal and 20thCentury Fox, with which redbox also has been involved in legal tussling.
It's obviously a big win for the studios, which felt redbox was at least partially responsible for their slumping DVD sales.
"We want to move consumers to activities such as retail rental, video on demand and buying that have the best economics for the studio," Kevin Tsujihara, president of Warner Bros. Home Entertainment, told the L.A. Times. "Those who want to pay $1 and are willing to wait, God bless them."
Consumers, then, will be the ones left with a choice of buying more expensive DVDs, renting them through a more expensive platform, or doing without. Seeing which way most jump, or if this really has any effect on DVD sales, will be issues to keep an eye on in the coming year.
Also, while this seems like a good move on paper initially, some analysts critical of redbox have long maintained the kiosk company could lose up to half its business if it agreed to such a delay.
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