Warner lines up with Fox, Uni on kiosk window

AUG. 13 | PHYSICAL: Studio will sell direct to Redbox, with 28-day title delay

By Susanne Ault -- Video Business, 8/13/2009

AUG. 13 | PHYSICAL: Warner Home Video officially lined up with 20th Century Fox Home Entertainment and Universal Studios Home Entertainment in pushing a later release window for DVD rentals through vending kiosks.

Warner said today that it will sell its titles directly to the kiosk channel, led by Redbox, beginning in October and will offer Warner titles 28 days after their general market release. The studio also will sell directly to the mail-order subscription channel, which Netflix dominates, but Netflix and others in the mail-order rental business will be offered titles at their initial release or with a 28-day window depending on the terms each retailer chooses.

The studio will no longer allow wholesalers to sell to the kiosk or mail-order rental channels.

Warner has a longstanding relationship with Netflix but is believed to be renegotiating its deal under these new terms. “We will evaluate the current proposal and discuss it with them,” said a Netflix spokesman.

“Redbox was informed today that Warner Bros. will take action to limit our consumers’ timely access to new release DVDs,” Redbox president Mitch Lowe said in a statement. “Redbox will continue to stand behind our customers and our commitment to providing convenient, affordable access to new release DVDs from all studios including Warner Bros.”

Warner insists that the choices it’s rolling out for kiosks and mail-order subscription services will advance studio and retail goals.

The studio “will be in discussions with both kiosk and mail-order subscription vendors, offering business options that will allow all parties to grow their respective businesses,” it said in a statement today.

Additionally, Warner is telling wholesalers they they cannot buy or sell any used Warner discs.

Kiosks were largely responsible for an 8.3% growth in consumer spending on movie rentals in the first half of the year, according to Rentrak, while DVD sales fell more than 15%. But some studios fault the kiosks for at least part of DVD sales drop-off. Studios are strongly opposed to kiosks’ $1 pricing and the large volume of used discs they create for sales, both of which the studios believe undercut new DVD sales.

Redbox, which offers $1-per-night DVD rentals through more than 17,000 kiosks in the U.S., is suing both Universal and Fox for alleged antitrust violations after those studios tried to impose 45- and 30-day delays, respectively, on the kiosk operator.

Not all studios oppose Redbox, however. Sony Pictures Home Entertainment and Lionsgate recently signed direct distribution agreements with Redbox for titles to be delivered the same day as their general release. Walt Disney Studios Home Entertainment also sells its titles to Redbox, though not directly, with the provision that it not sell its titles used.

Blockbuster CEO Jim Keyes addressed the Warner announcement in the rental giant’s earnings call with analysts today. Though Blockbuster is on track to have 500 Blockbuster Express kiosks deployed by partner NCR by the end of the month and 2,500 by end of the year, Keyes agreed with Warner’s tactic, calling it “complementary to Blockbuster’s multichannel approach.”

“For Blockbuster, it represents a competitive opportunity” because between Fox, Universal and Warner, 60% of new releases will have a delayed release window for kiosks, he said. Translation: Big Blue would rather have customers pick up a higher-priced rental in its stores than a $1-per-night DVD, even from its own kiosks.

“One dollar for viewing is not a sustainable industry model,” Keyes said.

Additional reporting by Danny King