Redbox opposes Universal’s lawsuit-dismissal request

Kiosk operator alleges studio boycott through distributors, retailers

By Danny King -- Video Business, 3/5/2009

MARCH 5 | Redbox claims in a new court filing that Universal Studios Home Entertainment has persuaded both wholesalers and Best Buy to not sell new release DVDs to the kiosk operator.

The filing requests that the court reject Universal’s motion to dismiss a five-month-old anti-trust lawsuit brought by Redbox against the studio. The move follows a recent agreement between Redbox and Universal to submit to mediation in the case, in which Redbox accuses Universal of violating anti-trust laws and holding back DVD and Blu-ray product if the kiosk operator doesn't comply with the studio's terms.

In yesterday’s filing, Redbox alleges that Universal not only has forced distributors Video Product Distributors and Ingram Entertainment to stop selling to and servicing the kiosk operator, but also has gotten retailers such as Best Buy to agree to not sell new-release copies to Redbox.

Universal “obtained the agreement of Best Buy and other retailers to cease or severely limit their sales of Universal DVDs to Redbox,” the kiosk operator said in yesterday’s filing. “In at least one instance, a Redbox employee was escorted out of a retail store for attempting to purchase multiple copies of a Universal DVD title.”

For the first couple months after Universal stopped its distribution to Redbox, the kiosk operator used alternative arrangements to stock new DVD titles from the studio by the weekend after the Tuesday street dates. Redbox today declined to say whether this was still the case.

Although most large retailers have policies limiting the number of copies shoppers can buy, they are generally not strictly enforced and, as a result, many rental stores buy some inventory at retail.

Redbox sued Universal last October, alleging that the General Electric unit violated anti-trust laws by insisting on a revenue-sharing agreement with Redbox that, among other things, creates a vending window 45 days after the initial DVD release and restricts sales of used discs. Universal, which in December filed a motion to dismiss the lawsuit, stopped distributing product to Redbox through VPD and Ingram on Dec. 1, forcing Redbox to make alternative arrangements, such as buying from retail, for Universal discs, which is about 15% of Redbox's inventory.

Last week, the companies notified a U.S. district court in New Jersey that they were willing to start settlement talks. The court scheduled a March 11 teleconference with the companies to discuss a possible settlement, according to yesterday’s filing.

Redbox declined to comment further on the lawsuit status. Universal declined to comment.

Redbox has led growth in the U.S. kiosk industry, which is expected to expand over the next few years as video store chains such as Blockbuster and Movie Gallery close underperforming stores. Redbox boosted its machine count to a current 12,900 from 6,550 last year through agreements with such chains as Wal-Mart and Walgreens, and will install as many as 8,000 new machines this year.