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Hollywood Studios Seeing ‘Red’ Over DVD Rental Kiosks

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Redbox, the low-cost vending machine that rents movies for $1/night has been sprouting up everywhere lately. And its success has made it the target of Hollywood studio’s wrath. Their major claim is that it’s responsible for de-valuing the price of DVDs, an accusation they’re not taking lightly in an economy that finds them increasingly protective of any and all revenue streams. Earlier this month, Fox and Universal ordered their wholesalers to stop supplying the machines with their titles.

According to the Hollywood Reporter, a representative for Fox was quoted as saying:

In the home entertainment business, Fox offers our movies through bricks-and-mortar retail outlets and online retailers, including both national and regional chains and small mom-and-pop stores, offering consumers a wide selection of new releases and catalog for both rental and purchase. Our desire is to maintain for Fox movies a thriving network of distribution serving all types of consumer preferences, on reasonable business terms for Fox as well as our distribution partners.

Fox is still awaiting a decision on their legal dispute.

They’re not the only ones.The ongoing battle between the studio’s and Redbox came to a head when, Coinstar Inc.,  the company behind the video-rental machines filed a lawsuit against Warnes Bros. on Tuesday in Delaware Federal Court. The dispute was over the fact Warner Bros. terms stated that Red Box is forced wait 28 days after a Warner Bros. movie is released on video to distribute it. Earlier this month Jeffrey Bewkes, CEO of Time Warner (parent of Warner Bros.) told the Associated Press:

We think that there may well be a role for $1 rental kiosks or pricing in that range, just like there are $1 movie theaters. We think it’s a question of the right window.

According to Nikki Finke, the judge in charge of the case made liberal use of puns in his decision, saying,

Redbox maintains that Universal has otherwise failed to ‘Do the Right Thing’ in seeking to prevent Redbox from buying new release Universal DVDs from other wholesalers and retailers, and in some cases succeeding in those attempts. With the ‘Mercury Rising’ in the relationship between Redbox and Universal, Redbox employees turned to a ‘Cloak and Dagger’ exercise, visiting Wal-Mart and Best Buy stores in an attempt to purchase multiple copies of Universal DVDs.

Despite all this legal wrangling, one studio has managed to buck the trend. Sony Corporation has signed a five year deal with Redbox, which grants them complete license to distribute Sony titles. The deal will give Redbox access to their movies at a discount rate, but forces them to destroy the disc, instead making a profit from them on the re-sale market. If you can’t beat ‘em join ‘em. At least they’ll make more money with Redbox than they do on illegal digital downloads.

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