Video-rental kiosk company Redbox is refusing a Warner Brothers request to make customers wait roughly two months before being able to rent a newly released WB movie on DVD, the company announced in a statement yesterday.
The statement is in direct response to contract agreement between the two companies that ended in February. In an effort to boost lagging DVD sales, film studio Warner Brothers decided earlier this month to delay all new releases from becoming available through many popular movie rental services, like Netflix, Blockbuster, and Redbox. This means the rental services must wait 56 days after a new Warner Brothers DVD hits retail store shelves before they are able to begin renting it out to customers.
The video rental companies can get around the 56-day delay stipulation, but it requires them to purchase all new DVD releases at full retail price rather than a discounted, wholesale rate. In doing so, however, it would raise a rental company’s operating costs and ultimately dip into its profits.
Yet, that’s exactly what Redbox intends to do.
“Redbox will continue to provide our consumers with affordable access to new release movies from all major studios including Warner Brothers at our more than 28,000 locations nationwide. We will work to provide Warner Brothers’ movies through alternative means,” wrote Redbox SVP of marketing and customer experience Gary Cohen in the statement. “Redbox maintains direct working relationships with every other major studio.”
While this may seem like a declaration of war from Redbox to Warner Brothers, it’s more or less just a smart business decision. The company realized that delaying these new releases for an extended amount of time would have an adverse effect on its ability to generate revenue. It could be as simple as Redbox not wanting to disappoint its loyal repeat customers. Or, it could be as calculated as determining that the potential financial loss from losing rental sales was greater than the cost of spending more on the actual DVDs.
Speaking of business decisions, Warner Brothers is making a bad one by imposing a delay to rental companies. In fact, since the move has the potential to raise those rental companies’ costs, it will push them closer to extinction – and eventually eliminate a healthy source of revenue to movie companies like Warner Brothers.
Copyright 2012, VentureBeat
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