Lionsgate Sticks with Redbox

8 Aug, 2011 By: Chris Tribbey

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Lionsgate DVDs and Blu-ray Discs will continue to appear in Redbox kiosks through August 2014, after the studio passed on an option to opt out of the five-year deal it signed with Redbox in mid-2009, according to an Aug. 8 filing with the Securities and Exchange Commission

The five-year, $158 million distribution deal included an opt-out clause, giving Lionsgate the ability to end its agreement with Redbox by Aug. 31, 2011.

“As a result of the Amended Letter Agreement, Lionsgate elected not to exercise its right to opt out of the licensing arrangement with Redbox,” the SEC filing reads.

While upbeat on Lionsgate’s decision, Eric Wold, research director with Merriman Capital in San Francisco, noted that the studio — representing less than 5% of 2010’s total domestic box office — has far less invested in Redbox than the majors. Wold pointed out that Sony, Paramount and Warner all have the option to renew or opt out of their Redbox contracts between now and January.

“Following at least two years of data covering sell-through and rental trends, it is apparent that Lionsgate management did not see a benefit to move to a delayed availability model,” Wold wrote in a note to investors. Universal Studios Home Entertainment, Warner Home Video and 20th Century Fox Home Entertainment all delay new release titles to Redbox for 28 days after street date.

Warner and Universal may aim to renegotiate their deals with Redbox, Wold suggested, though with “Netflix focusing away from physical DVDs and other rental kiosk operators struggling, we believe studios may need Redbox more now than they thought they did a couple of years ago. 

“With that, we would be surprised if there were any major changes to the existing agreements,” Wold wrote.

 

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