Redbox scored at least a partial victory in its battle with a triumvirate of Hollywood studios yesterday as a federal court ruled the company can proceed with an antitrust lawsuit filed last October against GE's Universal Studios. Though the Delaware judge threw out Redbox's additional claims of copyright misuse and tortious interference, he ruled Redbox can proceed with litigation claiming Universal is engaged in anti-competitive practices by denying the movie rental company--and by extension consumers--with newly released DVDs.
Universal, along with 20th Century Fox and Warner Bros., is refusing to offer new releases via Redbox's $1-per-film rental kiosks, claiming the $1 rentals undervalue the product and hurt DVD sales (the lawsuits are separate; Redbox filed against Fox early last week, and no suit has yet been filed against Warner Bros, who sided with Universal and Fox just last Friday). All three companies have demanded varying grace periods, ranging from 28 to 45 days, for new releases to sell on store shelves before shipping the films to Redbox.
The studios' claims that Redbox is undermining DVD sales are not completely unfounded. While studio revenue from DVD sales is expected to decline by $850 million this year, Redbox recently announced it will plant another 2,000 kiosks in Kroger supermarkets this year, adding to the nearly 18,000 already in service. Redbox allows customers to pre-select a DVD they would like to rent online, then pick it up for only a buck at the nearest kiosk. That low-cost convenience has driven Redbox's success, but several Hollywood studios feel that its come at their expense.
Others see Redbox's explosive growth and ease of use as a way to get titles out in front of more fans faster. Lions Gate Entertainment recently closed a five-year agreement with Redbox to offer its entire library through its kiosks. Sony signed on with Redbox months ago.
[via Wall Street Journal]