Redbox, Warner Sign Kiosk Distribution Deal25 Oct, 2012 By: Erik Gruenwedel, Chris Tribbey
Studio also joins kiosk vendor’s joint digital venture with Verizon
Redbox and Warner Bros. Home Entertainment Oct. 25 announced a multiyear agreement to bring the studio’s new-release Blu-ray Disc and DVD movies to Redbox kiosks 28 days after their retail release dates.
The agreement marks an end to contentious relationship between Warner and Redbox, a situation that found the kiosk vendor circumventing the studio and its distribution partners to acquire its new releases on street date. Redbox had no deal to buy titles directly from Warner, while Netflix, the other heavyweight in the rental sector, gets them only after 56 days.
Redbox also said it plans to join the Digital Entertainment Content Ecosystem (DECE) and has agreed to promote UltraViolet through a program of mutually agreed-upon promotions and marketing tactics designed to help retail customers discover UltraViolet.
“For the past 10 years, Redbox has been committed to giving consumers affordable access to new-release entertainment,” Redbox SVP Galen Smith said in a statement. “This new agreement continues this commitment and represents an exciting new chapter in our relationship with Warner, and an opportunity to explore our consumers’ interest in UltraViolet.”
The agreement begins with Warner titles with street dates from Jan. 1, 2013, through Dec. 31, 2014. The arrangement is designed to improve the economics for both Warner and Redbox while ensuring consistent availability of the studio’s titles for the consumer.
Heretofore, Redbox had been acquiring Warner titles through alternative means — a situation exacerbated by Time Warner CEO Jeff Bewkes’ insistence that low-margin distribution channels such as kiosks and Netflix undermined the sellthrough business.
“This deal is a win-win,” said Ron Sanders, president of Warner Home Video. “In addition to improved financials for both Warner Bros. and Redbox, the arrangement allows Redbox to satisfy consumer demand for our product. We also have the opportunity to promote UltraViolet at Redbox kiosks and grow consumer awareness of the benefit and ease of use of digital products and services.”
Separately, Warner Bros. Home Entertainment inked a deal with Redbox Instant by Verizon, the joint venture of Redbox and Verizon set to launch later this year, which plans to offer digital movies together with the convenience and value of Redbox DVD and Blu-ray Disc rentals.
This agreement will make Warner titles available in VOD and electronic sellthrough formats and allow Redbox Instant by Verizon to support and distribute Warne’s UltraViolet-enabled movies. The deal also covers a multiyear SVOD agreement supporting feature-length content.
“This agreement fits perfectly with Redbox Instant by Verizon's vision for bringing people the movies that matter, wherever and whenever they choose, using the devices and media they prefer, at home or away,” said Shawn Strickland, CEO of Redbox Instant by Verizon.
“We look forward to working with Verizon and Redbox to offer consumers a wide selection of great content that can be enjoyed, whether buying or renting, on a variety of devices, and in any format that fits their individual preferences,” said Thomas Gewecke, president of Warner Bros. Digital Distribution. “We are also pleased to have a new, direct relationship with the Verizon and Redbox joint venture to ensure their customers have consistent access to our movies.”
The news comes as Redbox parent Coinstar reported third-quarter revenue of $537.5 million for the three months ended Sept. 30, up from $465.6 million during the same quarter in 2011. The company saw its profit down slightly to $36.8 million, down from $37.1 million during the same quarter in 2011.
Redbox revenue — including revenue from the recently acquired NCR kiosks — grew 17.9% during the quarter to $459.5 million. Total rentals for the quarter were 176.4 million, down from 177.9 million. Blu-ray rentals represented 9% of rental volume, and 10.5% of Redbox revenue.
Nearly 4,000 new kiosks were added during the quarter, and Redbox reported its physical disc rental market share jumping 9.4% to 44.1% overall.
Redbox executives pointed to 23% fewer new theatrical releases and people staying home for the Olympics as part of the reason for the lower profit.
Regarding the launch of Redbox Instant by Verizon, the company said content for the service is being acquired, and a test among 500 employees has been concluded, with a beta trial expected to commence “in the coming week.”
Regarding expansion into Canada, Redbox had 270 kiosks installed there by the end of the quarter.
For the fourth quarter, Redbox is looking at The Avengers, The Dark Knight Rises, That’s My Boy, The Amazing Spider-Man, The Expendables 2, The Campaign, Men In Black 3, Brave, Total Recall, The Watch and Arthur Christmas to all perform well.
“In the third quarter, Coinstar delivered 16% year-over-year revenue growth and solid bottom line results,” said Coinstar CEO Paul Davis. “Redbox revenue increased 18% despite temporary headwinds from the new release schedule and Olympics that negatively impacted rentals. We are optimistic regarding the future of Redbox and are focused on key Redbox growth initiatives, including extending the footprint in the U.S. and expanding into Canada, as well as our digital offering with Redbox Instant by Verizon.”