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Kiosk Operators Aim to Avoid Troubles With Uni

30 Oct, 2008 By: Chris Tribbey

DVD kiosk operators are looking to circumvent Universal Studios Home Entertainment’s new revenue-sharing policies, which have sparked a lawsuit from Redbox.

The studio’s new terms for kiosk operators would prohibit renting or selling Universal DVDs until 45 days after they first street; limit the number of Universal DVDs the kiosk operator can stock; and require kiosk operators to destroy Universal DVDs after they leave the kiosks, instead of being sold as used to consumers. The policy change would take affect Dec. 1.

Redbox has filed suit against the studio over the proposals, claiming they misuse copyrights and violate antitrust laws.

“Defendants will terminate Redbox’s two distributors [Video Product Distributors and Ingram Entertainment] if they continue supplying Redbox with Universal DVDs or providing other services to Redbox — unless Redbox forsakes its customers. …” the suit reads.

Fellow kiosk operators TNR Entertainment and DVD Play have both sought legal advice regarding the changes, and the presidents of both companies have expressed concerns about how they would affect their businesses.

“Our initial review of Universal’s policy change is that it will adversely affect [our] commitment [to consumers],” TNR’s president and CEO Tim Belton said.

Chuck Berger, chairman, president and CEO of DVD Play, said he’s concerned Universal is trying to “freeze out the kiosk channel.”

“We plan on having Universal titles in our kiosks,” he said, adding that DVD Play had been contacted by supplier VPD, which had been contacted by Universal. “We’d find a way to get those titles. We’re not going to deny the users what Universal wants to deny them, and that’s an affordable DVD rental option.”

Fred von Lohmann, an attorney with the Electronic Frontier Foundation, said he believes Universal’s new policies are a losing proposition.

“The word outrageous comes to mind,” he said. “And I think consumers should be the ones most concerned about this. If this is permitted, it’s hard to see how anyone would want to invest in these new businesses, if studios can go in and shut you down.”

Von Lohmann said nothing would stop kiosk operators from buying Universal DVDs at retail on street dates, or go through “a middle man,” yet the added costs and hassles would hurt. He called Universal’s new revenue-sharing terms “a very cunning strategy” but forecasts that they would lose the Redbox suit.

“It’s like back in the ’80s when they went after mom-and-pop video stores … it’s the same can of worms they’ve been working on since [VHS] and before that, Betamax,” he said. If Redbox wins, he added it could “undermine Universal’s ability to manage its copyrights.”

However, if Redbox fails and Universal prevails, “What would ever put pressure on Hollywood to bring prices down for things like video-on-demand? Nothing would.”

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