DECEMBER 11, 2008, 3:42 A.M. ET Universal Challenges Video Kiosks
By SARAH MCBRIDE Wall Street Journal http://online.wsj.com/article/SB122895835251696731.html Last weekend, one of the top titles in Redbox video-rental kiosks was "Wanted," the Universal Pictures thriller about a clerk turned assassin. But instead of rejoicing, Universal has been trying to block Redbox from selling "Wanted" along with its other new releases. Though Universal had threatened to cut off Redbox's supplies of "Wanted" DVDs, the kiosk retailer had been able to get them anyway by tapping new channels. In October, Redbox slapped Universal with a lawsuit filed in U.S. District Court in Delaware, alleging the studio is violating antitrust laws and misusing copyright. On Friday, Universal asked the court to dismiss the case. Universal is one of several studios that dislike the way kiosks such as Redbox sell and rent DVDs, claiming that its prices are too low and are hurting other DVD retailers. The spat between Redbox and General Electric Co.'s NBC Universal is part of a broader struggle in the industry to cope with declining DVD sales. DVD sales are likely to fall about 6% this year, according to Adams Media Research, cutting into what had been one of the most important sources of revenue for movie studios. Redbox isn't the only kiosk operator, but it is by far the biggest. It has installed 12,000 kiosks around the U.S., compared with about half that a year ago. By comparison, Blockbuster Inc. has 5,000 U.S. stores. Because the kiosks are cheap to operate, Redbox rents movies for $1, making it a hit with consumers. Blockbuster, which must rent and staff stores, might charge as much as $4.99 for the same rental. Last week, Blockbuster said it was testing renting some classic movies for 99 cents, because of factors such as the poor economy. It is also rolling out DVD kiosks of its own, starting with about 50 kiosks during the next few weeks at various retail locations such as convenience stores. Big retailers such as Blockbuster typically give studios a portion of rental revenue on top of purchasing the DVDs they rent out. But Redbox doesn't cut the studios in on rentals. Moreover, Redbox kiosks don't stock much of the niche, arthouse movies that studios like to promote, especially around Oscar season. In addition, studios claim that stuffing DVDs in kiosks may cheapen the underlying product. "The studios have been worried about the Redbox model from day one," says Tom Adams, president of Adams Media Research. As a studio, "Why would I help you build a business that charges a dollar for a product I'm trying to sell for $20?" Studios have been keeping a close eye on Universal's efforts to rein in the rapidly growing Redbox. According to the lawsuit Redbox filed against Universal, the studio in August deployed executives to Redbox's headquarters near Chicago to set new terms for stocking Universal movies. Under the proposed agreement, Redbox would have to start sharing revenue with Universal, and wouldn't be able to stock more than eight copies of a movie per kiosk, compared with the four dozen or so Redbox might stock for the most popular releases. Universal also wanted Redbox to stock its DVDs no earlier than 45 days after they hit traditional retailers. The vast majority of sales and rentals occur in the weeks immediately after a movie is released on DVD. In its motion to dismiss the lawsuit, Universal said Redbox's charges of copyright misuse and antitrust violations were baseless. Both companies declined to comment on the lawsuit. According to the legal documents, the studio said if Redbox didn't comply it would cut off the supply of Universal movies. But last week, copies of Universal's "Wanted" arrived in Redbox kiosks -- a day or two later than usual, but in time for the weekend. Redbox said it used "new acquisition strategies," but declined to say what they were. -- ================================ George Antunes, Political Science Dept University of Houston; Houston, TX 77204 Voice: 713-743-3923 Fax: 713-743-3927 Mail: antunes at uh dot edu *********************************** * POST TO [email protected] * *********************************** Medianews mailing list [email protected] http://lists.etskywarn.net/mailman/listinfo/medianews
