Redbox sues Warner over DVD release window
PHYSICAL: Lawsuit follows similar claims against Universal, Fox
By Danny King and Marcy Magiera -- Video Business, 8/19/2009
AUG. 19 | PHYSICAL: Backed by court approval to proceed with an antitrust suit against Universal Studios Home Entertainment, Redbox threw another punch at the major studios, suing Warner Home Video on similar grounds.
Redbox charges $1 a night for DVD rentals.
The suit, filed in U.S. District Court in Delaware, is in response to Warner’s move last week to delay selling titles to the largest U.S. movie-rental kiosk operator until four weeks after their street date. Universal and 20th Century Fox Home Entertainment are imposing similar delays on Redbox and other DVD rental kiosk operators. Redbox also is suing Fox. The three studios represent a combined 40% of the DVD rental market, according to Rentrak.
Coinstar-owned Redbox called the Warner suit an effort to “protect consumers’ rights to access” to new titles. “Warner Home Video’s actions come at the expense of consumers,” Mitch Lowe, president of Redbox, said in a statement.
Executives at Warner couldn’t immediately be reached.
Redbox on Monday got a greenlight from U.S. District Court judge Robert Kugler to pursue its lawsuit against Univeral on antitrust grounds. The judge did grant Universal dismissal of counts related to copyright misuse and interference with Redbox’s business relationships with video wholesalers Ingram Entertainment and VPD.
Like the earlier two actions, Redbox’s new suit against Warner charges the studio with copyright misuse, tortious interference with business relationships and multiple antitrust violations. As in the other actions, the retailer is seeking injunctive relief and monetary damages.
Redbox rents DVDs at about 18,000 kiosks for $1 a night, a practice that some studios believe cannibalizes both higher-priced rentals at outlets such as Blockbuster and new DVD sales. In the Warner suit, Redbox says the average rental at Blockbuster is $4.
Blockbuster last week endorsed a rental window for kiosks, which would protect its storefront business, even though it is entering the kiosk sector.
Last week, 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.
In its suit, Redbox said, “Despite clear consumer preference for [Redbox’s] lower-priced alternative, Warner seeks to strangle that alternative to prop up an artificially high pricing scheme. Warner’s tactics—cutting off Redbox’s sources of supply unless Redbox acquiesces to a business-killing ‘blackout period,’ hearkens back to the day when Warner and other studios controlled the entire distribution chain under the old ‘studio system,’ when they sought to choke off the supply of content to the new television medium during its infancy, and later, when they fought the introduction of the VCR in the 1980s.”
While Redbox is brawling with the studios that have tried to impose a delayed window on kiosk rentals, it has rewarded the studios willing to do business with the kiosk company.
Redbox in the past several weeks has signed five-year direct distribution agreements with Sony Pictures Home Entertainment, worth an estimated $460 million, and Lionsgate, worth an estimated $158 million. Both studio deals, and one with Walt Disney Studios Home Entertainment, limit the sale of the studios’ titles as used product.
The sale of used DVD inventory to consumers also is an ongoing issue for studios, which see it as replacing new DVD sales.
Last October, Redbox sued Universal, alleging that the studio, whose DVDs account for about 15% of Redbox’s rentals, violated antitrust 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 the studio’s 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.
