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‘Alice’ in Redbox on Street Date

1 Jun, 2010 By: Erik Gruenwedel

Alice in Wonderland

The year’s top grossing movie, Alice in Wonderland, June 1 appeared in discount rental kiosks on street date despite speculation by some analysts Walt Disney Studios Home Entertainment would create a last-minute 28-day retail window for the title.

Analyst Richard Greenfield, with BTIG Research in New York, has long argued that $1 per day DVD kiosks, spearheaded by market leader Redbox, pose a serious threat to the studio business model.

Specifically, offering new release titles on street date, analysts say, could undermine higher volume DVD/Blu-ray Disc sellthrough, transactional video-on-demand (VOD) and traditional rental, among other distribution channels.

Greenfield believed that had Disney “windowed” Alice in the same manner that 20th Century Fox Home Entertainment did with Avatar, studios such as Sony Pictures Home Entertainment, Paramount Home Entertainment and Lionsgate currently supplying Redbox with content on street date would have changed course.

“It makes no sense,” Greenfield wrote in an email last month.

Disney CEO Bob Iger, in previous financial calls, has reiterated reluctance to dictate pricing by third-party vendors of Disney content, including big box retailers and kiosks.

Eric Wold, analyst with Merriman Curhan Ford in New York, said Paramount has until June 15 to decide whether to continue distributing titles to Redbox on street date or enact a retail window similar to what Warner Home Video and Universal Studios Home Entertainment have done. The studio is in the first year of a 5-year agreement that has Redbox paying it $575 million for access to new releases on street date.

“Without a doubt, we believe that some investors might be disappointed if Paramount decided to change to a 28-day delay distribution agreement — with the concern that it would potentially negatively impact Redbox transaction volume,” Wold wrote in a note.

The analyst said he believes Redbox parent Coinstar would only enter into such a deal if it was accretive to future results, including higher DVD unit volumes and lower unit costs.

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