Fox files motion to dismiss Redbox suit

PHYSICAL: Studio says it's operating fairly with kiosk operator

By Susanne Ault -- Video Business, 10/1/2009

OCT. 1 | PHYSICAL: 20th Century Fox Home Entertainment today filed a motion to dismiss the antitrust lawsuit brought against it by Redbox, painting the popular $1-per-night DVD rental kiosk operator in court papers as unwilling to pay the same amount paid by other retailers for the studio’s movies.

“Redbox’s legal claims are fatally flawed,” Fox said in a statement. “Fox’s filing today makes clear that, in the end, the case is all about Redbox’s refusal to make a business deal on general terms similar to those paid by others in the industry. Unable to get the terms it wanted at the bargaining table, Redbox instead decided to file this meritless lawsuit.”

The studio also is seeking a venue change from Delaware to Los Angeles.

Redbox last month filed a federal antitrust suit against Fox because of studio terms that would prohibit wholesalers from selling Fox DVDs to the rental kiosk channel until at least 30 days after their initial street date. The suit charges the studio with copyright misuse, antitrust violations and tortious interference with contractual/business relationships in regard to Redbox’s relationships with wholesalers VPD and Ingram.

In court documents filed Thursday, Fox says it is operating fair and square with Redbox and is treating the kiosk operator like any other retailer. The studio denies that it ever refused its titles to Redbox. Fox did offer the kiosk company similar pricing and distribution terms that have been accepted by other retail customers, the studio said in the filing. However, Redbox refused those terms, giving Fox the right to adjust its business relationship, the studio maintains. In fact, Fox could have chosen to stop selling DVDs completely to Redbox, but is allowing distributors to service Redbox with its titles 30 days after street.

“Antitrust law does not require a seller to provide its product through the distribution channel that the buyer demands, on the date that the buyer demands, or at the price that the buyer demands,” stated the Fox court filing. “To the contrary, sellers have considerable freedom under the law to sell [or not sell] to whomever they want, how they want and when they want. To this end, a seller’s distribution policies do not violate [antitrust law] unless the plaintiff proves a contract, combination or conspiracy that injures competition. Redbox cannot meet any of these elements.”

Fox has directed wholesalers to sell its titles to Redbox 30 days after their general street date, beginning with Oct. 27 release Ice Age: Dawn of the Dinosaurs. It noted in the court filing that Redbox can buy Fox movies on street date from other retailers or from the studio itself.

Fox is one of a number of studios seeking a kiosk channel delay of as much as 45 days. Redbox also is suing Universal Studios Home Entertainment and Warner Home Video on similar grounds.

A U.S. District Court judge for Delaware already has 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. The two counts dismissed relate to copyright and tortious interference, the latter term implying an attempt to disrupt another party’s business relationships.

“We are confident in our legal position and the merits of our case as underscored by a recent decision in Delaware Federal Court,” Redbox president Mitch Lowe said in a statement. “20th Century Fox continues its pursuit to prohibit consumer access to new release DVDs at affordable prices. Redbox remains steadfast in our commitment to protecting consumers’ rights and to providing our customers the DVDs they want, where they want and at the low price they want.”

Lowe noted that studios including Lionsgate, Paramount Home Entertainment and Sony Pictures Home Entertainment have distribution agreements with Redbox.

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. But DVD sales fell more than 15% in the same period, and some studios believe that inexpensive kiosk rentals and consumer sales of the kiosks’ used rental discs are at least partly to blame. The distribution deals Redbox has with Lionsgate, Paramount and Sony, as well as an agreement with Walt Disney Studios Home Entertainment, all limit Redbox’s sales of used rentals discs to consumers.