Looks like Redbox has told Warner Bros to take a hike with its effort to double the waiting period for new rental DVDs to 56 days. When the contract to acquire discs directly from Warner Bros expires today Redbox will “work to provide Warner Brothers’ movies through alternative means,” says Gary Cohen, SVP for marketing and customer experience. He adds that Redbox “maintains direct working relationships with every other major studio.” Disney, Paramount, and Sony provide new DVDs to Redbox the day they’re released; Universal and Fox require the kiosk company to wait 28 days. Redbox is taking a big risk by choosing to buy Warner Bros discs from outside sources: That could be more costly. What’s more, the company may not be able to buy enough copies of hit films to satisfy its customers — especially if Warner Bros can persuade retailers to cap the number of the studio’s discs they’ll sell to a single customer. (Earlier this morning Walmart agreed to continue housing Redbox kiosks to early 2015.) But Warner Bros also is taking a gamble: There’s nothing to stop Redbox from flooding the market with used Warner Bros DVDs a few weeks after they’re released, when rental demand for the titles lets up. Still, Warner Bros wants to increase the delay before providing discs to low-cost rental companies because it believes that will help to boost sales. That’s become an important initiative for Warner: It’s also leading the pack in offering discs under the entertainment industry’s Ultraviolet campaign which makes it possible for buyers to also stream movies to digital devices. Earlier this month Netflix agreed to the 56-day delay. Studios fear that their profits will take a hit as cash-strapped consumers increasingly rent discs from low cost services; Redbox charges $1.20 a night. Rental spending exceeded sell-through last year — the first time that has happened since 1998 — Morgan Stanley analyst Benjamin Swinburne says in a report this morning. But Susquehanna Financial Group’s Vasily Karasyov says today that “declining DVD sales have no impact on major studios’ profitability” because discs are expensive to produce and market.
By DAVID LIEBERMAN, Financial Editor | Tuesday January 31, 2012 @ 10:20am ESTTags: Redbox, Warner Bros Home Entertainment Group
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