Redbox antitrust suit against Universal upheld
PHYSICAL: Judge throws out two of three claims but denies studio's dismissal motion
By Danny King -- Video Business, 8/18/2009
AUG. 18 | PHYSICAL: Redbox’s lawsuit against Universal Studios Home Entertainment was upheld by a U.S. District Court judge less than a week after the U.S. movie-rental kiosk leader filed a similar suit against 20th Century Fox over DVD distribution terms.
Robert Kugler, a U.S. District Court judge for Delaware, granted the dismissal of two of the three counts against Universal in the 10-month-old lawsuit but denied Universal’s motion to dismiss the antitrust claim altogether, according to court records. The two counts dismissed relate to copyright and tortious interference, the latter term implying an attempt to disrupt another party's business relationships.
The decision has both sides claiming victory in the ongoing battle pitting Redbox, a division of coin-exchange machine maker Coinstar, and studios such as Universal, Fox and Warner Home Video, which are prohibiting the sale of new DVD releases to kiosk operators such as Redbox until at least four weeks after their street date.
“We appreciate the Court’s thoughtful review of this issue and look forward to pursuing our claim and protecting our consumers’ rights,” Mitch Lowe, president of Redbox, said in a statement late yesterday.
“Universal is pleased that the Court today dismissed two of the three claims asserted by Redbox and appreciates that the claims made by Redbox are now reduced significantly,” the studio said in a statement late yesterday. “As was the case prior to the Court’s ruling, Universal maintains that its actions have been consistently lawful, and will vigorously defend the remaining claim in this case.”
Last October, Redbox sued Universal, alleging that the studio, whose DVDs account for about 15% of Redbox’s rentals, violated anti-trust laws with an attempt to create a “vending rental window” 45 days after the standard DVD street date. In the Oct. 10, 2008, complaint, Redbox said Universal presented the retailer with a “take it or leave it” revenue-sharing agreement that would shrink consumer choice by forcing Redbox to wait until 45 days after street date to rent Universal titles, limiting the number of copies of Universal titles Redbox kiosks could stock and requiring Redbox to destroy DVDs after their rental cycle instead of letting Redbox sell them as used product. In December, Universal filed a motion to have the case dismissed.
Last week, Redbox filed a similar claim against Fox after the studio directed wholesalers to not sell its new release titles to any vending operator until 30 days after street date beginning with the Oct. 27 release of its $151 million-grossing Ice Age: Dawn of the Dinosaurs. The suit, filed Aug. 11 in U.S. District Court in Delaware, charged the studio with, among other things, copyright misuse and antitrust violations in regard to Redbox’s relationships with wholesalers VPD and Ingram. Redbox is seeking injunctive relief and unspecified monetary damages.
That same day, Lionsgate said it signed a five-year, estimated $158 million deal to distribute its DVDs to the kiosk operator on their initial street date.
Two days later, Warner said it would 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.
Redbox hadn’t filed a claim against Warner as of late yesterday.
Redbox also has a distribution agreement with Sony Pictures Home Entertainment, similar to the one with Lionsgate. Both studio deals, and one with Walt Disney Studios Home Entertainment, limit the sale of the studios’ titles as used product.
