Universal Extends 28-Day Embargo With Redbox1 Mar, 2012 By: Chris Tribbey, Erik Gruenwedel
Agreement through August 2014 is a blow to Warner’s attempt to sanction lower-margin rental options through a 56-day embargo
Universal Studios Home Entertainment March 1 said it extended its current 28-day embargo on new-release discs to Redbox through August 2014.
The deal was announced by Craig Kornblau, president of Universal Studios Home Entertainment, and Galen Smith, SVP of Redbox.
"The multiyear agreement between Universal Studios Home Entertainment and Redbox represents a win for consumers, Universal and Redbox," Smith said. "Redbox is committed to forging relationships that provide our consumers with affordable and timely access to new release content."
The extension, which was signed two months before expiration of the existing deal, did not change any of the undisclosed fiscal arrangements.
Eric Wold, analyst with B. Riley & Co. in Los Angeles, said the new deal should ease investor concerns regarding Redbox having to expand its workaround strategy to another studio beyond Warner Home Video.
Warner in January said it would impose a 56-day embargo on new releases to Redbox. Parent Coinstar responded by employing a workaround program whereby Redbox acquires new Warner titles through third-party retail sources on street date. Such a strategy — while effective — is more expensive and a major concern to investors.
“We believe this is significantly positive news and removes a cloud over [Coinstar] shares,” Wold wrote in a March 1 note.
The analyst said the distribution agreement portends the possibility that 20th Century Fox Home Entertainment would also renew its 28-day embargo with Redbox, which expires in April 2013.
“We believe concerns over potential changes to that agreement should lessen following this news,” Wold wrote.