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Disney's New Terms

17 Feb, 2011 By: Erik Gruenwedel and Chris Tribbey

Studio raises prices to Netflix and Redbox starting with Secretariat

Walt Disney Studios Home Entertainment has upped the unit disc price it charges rental kiosk vendors, notably Redbox, and Netflix.

Speaking Feb. 17 at a Disney investor event, distribution president Bob Chapek said disc prices for new releases would be “full wholesale” on street date and around $10 six weeks later.

The Los Angeles Times reported the new pricing at $17.99 per title.

Redbox president Mitch Lowe confirmed Feb. 16 that the kiosk operator and Disney had updated their agreement for new-release DVDs.

“We did recently update our agreement with Disney, and continue to maintain a strong relationship with the studio,” he said. “Each of our studio partnerships is unique. Disney has been a consistent partner since day one, and we are proud to feature Disney titles day-and-date at our more than 26,000 locations nationwide.”

Disney CEO Bob Iger said the revised deals underscore changing market dynamics and consumer consumption of home entertainment. Iger said he is in favor of establishing windows and different pricing to specific distribution channels.

As a result, Iger said the studio’s distribution deal with Netflix remains short-term due in part to the online DVD rental pioneer’s explosive growth. He said Disney will continue to be “judicious” about how it windows product to Netflix, which he said includes limiting in-season TV programming versus catalog.

Iger said it was too early to determine the effect of altered windows and pricing, except to say they had not resulted in any cannibalization and instead had generated incremental revenue.

A Netflix spokesman said the company would not comment on its studio deals.

Chapek said the higher pricing began with the Jan. 25 release of Secretariat.

Secretariat debuted at No. 17 on Redbox’s rental chart its first week in kiosks, but was No. 2 at brick-and-mortar stores according to Home Media Magazine research, a result that suggests Redbox did not stock as many copies of Secretariat as other in-demand new releases. A similar pattern emerged during the title’s second and third weeks as well.

At a Feb. 16 investors event, Paul Davis, CEO of Redbox parent company Coinstar, said Redbox’s relationship with the studios is mislabeled as “hostile,” but left open the possibility that Redbox could return to a workaround program should any of the agreements with studios sour. Redbox at one point had teams of employees buying titles at retailers such as Walmart, to ensure they were available in kiosks.

“We want to keep the dialogue open,” Davis said. “What’s good for you; what’s good for us.”

Universal Studios Home Entertainment, 20th Century Fox Home Entertainment and Warner Home Video have agreements with Redbox that keep new-release DVDs out of the kiosks for 28 days after street date. Sony Pictures Home Entertainment, Paramount Home Entertainment and Lionsgate have agreements with Redbox that allow new-release titles in kiosks on street date under various terms.

John Latchem contributed to this report.

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