Analyst: ‘Avatar’ DVD Could Trigger Fox/Redbox Pact6 Apr, 2010 By: Erik Gruenwedel
The April 22 DVD release of box office behemoth Avatar could prove to be the catalyst that produces a distribution deal between 20th Century Fox Home Entertainment and Redbox, an analyst said.
Fox, along with Universal Studios Home Entertainment, remain as opposing litigants against Redbox in a long-running legal dispute over the kiosk vendor’s right to rent the studios’ new release titles on street date for $1 per day.
The studios have imposed shipment embargoes on new release titles to all kiosks in an effort to establish a retail window for movies, in addition to video-on-demand (VOD).
Redbox, which has been acquiring select Fox/Universal titles via third-party retail channels, recently inked a distribution deal with Warner Home Video that called for increased copy depth and better pricing in exchange for a 28-day shipment delay.
Eric Wold, analyst with Merriman Curhan Ford in New York, said Fox’s “bare-bones” DVD/Blu-ray Disc release of Avatar with no bonus material is the first installment of a multipronged distribution strategy by the studio that includes release of an “ultimate-version” DVD/Blu-ray Disc in November and a 3D Blu-ray edition in 2011.
“We believe that if consumers plan to purchase the ‘ultimate version’ of the DVD this November, they might be less willing to purchase the ‘bare-bones’ version later this month — unless, of course, that version is not available for rental for the first 30 days,” Wold wrote in a note.
The analyst said Fox would want to have a DVD distribution deal in place (and 28-day delay) with Redbox (and possibly Netflix) in order to spur additional DVD purchases at the expense of rentals.
“Without a doubt, Avatar will be the one of the highest grossing DVD/Blu-ray releases during 2010 … and one that Fox would want to monetize most effectively,” Wold wrote.
The analyst said Redbox’s deal with Warner had a positive effect on parent Coinstar, which saw its shares rise 25% following the end of hostilities in February.
Wold said an agreement with Fox would leave Redbox (and Coinstar shareholders) still facing litigation with Universal and the prospect of Paramount Home Entertainment opting out of its $576 million distribution deal, however remote.
“Both, we believe, would be very manageable for investors and a much reduced level of concern from last year’s levels,” he wrote.