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Uncovering the business behind the box

April 13, 2012

 

Stephanie Manis searches for a movie at the Redbox kiosk in Walmart. Manis uses Redbox to preview movies before deciding to purchase them for a higher price.–Photo by Grace Moore

GRACE MOORE
Staff Reporter

 

A Redbox press release from March 5 stated that more than 68 percent of Americans live within a five-minute driving radius of a Redbox kiosk.

 

While placing more than 35,400 self-service kiosks at 29,000 locations nationwide, Redbox stepped on a few toes.

 

According to a September 2009 article in The New York Times, Redbox’s rapid growth had “Hollywood’s blood boiling,” but in early March of 2012, the temperature reached an almost-unanimous cooling point.

 

“Furious about a potential cannibalization of DVD sales and a broader price devaluation of their product, three studios (20th Century Fox, Warner Brothers and Universal) are refusing to sell DVDs to Redbox until at least 28 days after they arrive in stores,” according to 2009 article written by The New York Times media reporter Brooke Barnes.

 

On the other hand, Barry Babin, department head of marketing and analysis at Tech, said there seems to be much to admire in the success of Redbox.

 

When the three studios cut off distribution to Redbox, it pursued alternate means.

 

In a “Business Insider” website interview with Redbox, a company spokesperson, in regards to the company’s now-altered relationships with previous suppliers, said Redbox “employs alternative acquisition channels, which includes major third-party retailers (Walmart).”

 

A Walmart corporate communication spokesperson was contacted in March for this story and responded in an email interview that the company does not discuss its relationships with suppliers.

 

Redbox was renting DVDs out for $1 per night, which prompted three studios to cease DVD distribution to Redbox kiosks until 28 days after a film’s release into stores.

 

While these events were emerging, Redbox sued Universal Studios Home Entertainment for violating federal antitrust laws, which aim to prevent monopolies and copyright misusage.

 

The North Carolina Journal of Law and Technology publication said it was odd that USHE did not claim copyright infringement toward Redbox, but rather the studio threatened to end DVD sales with Redbox suppliers.

 

According to the First Sale Doctrine in the U.S. Constitution, consumers of copyrighted items do not have the right to reproduce that particular copy, but copyright holders cannot “prevent or restrict the resale or other further transfer of possession of such copies.”

 

The First Sale Doctrine alone declares Redbox’s actions of purchasing DVDs in third-party retail stores as legal.

 

Redbox does not replicate DVDs, which violates copyright infringement laws. Instead, it buys mass quantities of a single item and rents them out. These actions are protected by the Constitution.

 

“If the courts actually allow Redbox to get away with this, I hope some people do decide to compete, who actually need the money,” said Elizabeth Christian, an assistant professor of journalism who teaches media law at Tech. “Theoretically, engineering students could design a green rectangle and stock it with Walmart movies.”

 

“Redbox v. Universal” was concluded on Sept. 17, 2009.

 

The court ruled in favor of Redbox’s accusation to USHE’s violation of antitrust law, but it removed the copyright misusage claims toward USHE.

 

A press release from Redbox dated March 1, 2012, said Redbox’s war with USHE is in a ceasefire.

 

The two companies signed a multi-year agreement stating movies will appear in Redbox kiosks no sooner than 28 days after their release in retail.

 

Warner Brothers opted for a 56-day delay, according to the Los Angeles Times, but Redbox refused.

 

“I can understand why Redbox would get mad that they want to double the length of time in our culture of wanting things instantaneously,” Christian said.

 

In the article, Gary Cohen, Redbox’s senior vice president of marketing, said Warner Brothers’ movies will still be provided through alternate means.

 

Additionally, 20th Century Fox has a similar agreement to that of Universal set to expire in 2013.

 

Redbox now sells its product for $1.20 per night, plus tax.

 

Stephanie Manis a Redbox user, said the 28-day delay for certain movies does not really bother them.

 

“Sometimes we rent a movie from Redbox we want to see,” Manis said, “and if we like it, then we’ll go out and buy it.”

 

The couple said they enjoy Redbox DVD rentals as a trial process to essentially test out movies.

 

“Johnny English Reborn,” starring Rowan Atkinson, is a new release in Redbox kiosks and was available for retail purchase at Walmart on February 28.

 

It appeared March 27 in the Redbox touch-screen menu 28 days later.

 

Email comments to gmm008@Latech.edu.

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