Redbox Antitrust Case Can Proceed Against Universal, Federal Judge Says


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]