UPDATE: Warner Takes Aim at Redbox, Netflix

14 Aug, 2009 By: Chris Tribbey, Erik Gruenwedel

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Warner Home Video is drastically changing the way it sells DVDs and Blu-ray Discs to rental kiosks such as Redbox and by-mail services such as Netflix.

The studio Aug. 13 announced that come October, it will sell to them only directly, bypassing third-party wholesalers, and will withhold all new releases from kiosks until 28 days after street date — a restriction sources say will apply to Netflix and other subscription services as well, unless they agree to share rental revenue with the studio.

“Warner will be in discussions with both kiosk and mail-order subscription vendors, offering business options that will allow all parties to grow their respective businesses,” the studio said in a statement.

Warner executives would not comment further. Warner thus becomes the third studio to hold off selling new releases to Redbox and other kiosks because it doesn’t want dollar rentals to interfere with sales of these releases — particularly since many Redbox kiosks are located in the lobbies of Wal-Mart stores, the country’s biggest retail seller of DVDs.

But industry sources say the most revolutionary aspect of the new policy is that it targets not just kiosks but also subscription rental services. They maintain that Netflix and other by-mail renters, too, will be subject to a 28-day window on new Warner DVD and Blu-ray Disc releases unless they strike revenue-sharing deals with the studio. Sources say Warner has no such agreements in place with Netflix.

Ken Ross, VP of corporate communications for Netflix, said the company has had a relationship with Warner for a decade, buying directly from the studio, and not its wholesalers, under a series of agreements.

“We’ll evaluate the current proposal, and we’ll discuss it with the studio as we’ve always done,” he said.

Warner also has revised its wholesaler terms to prohibit the purchase and sale of its previously viewed product.

The studios have been split in their treatment of the growing kiosk business, some imposing windows and others making deals.

Redbox president Mitch Lowe said Warner is trying to limit Redbox consumers’ access to new releases. “Redbox will continue to stand behind our customers and our commitment to providing convenient, affordable access to new-release DVDs from all studios, including Warner Bros.,” he said.

Lowe made no comment regarding potential litigation against Warner.

Chuck Berger, of kiosk company DVDPlay, said the studios are trying to block a “tsunami” of technology, comparing recent studio actions to their resistance to the Web.

“They’re not keeping titles out of the kiosks,” he said.

Additional reporting by Thomas K. Arnold.

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