Now News Corporation and Universal Pictures are withholding newly released DVDs from Redbox as part of a lawsuit.  Since studios are starting to withhold DVDs, Redbox is purchasing the DVDs themselves from Wal-Mart and other retail companies which is cutting into their own profits.

On the other hand, Sony Pictures has signed a 5 year deal for supplying DVDs to Redbox.  However Sony Pictures DVDs had to be destroyed after Redbox reached a certain rental limit for each DVD rather than reselling it.

This past Wednesday, Fox ordered that new release DVDs should not be given to Redbox until 30 days after they have been available for sale.  This policy will be effective starting October 27.  Fox said that the $1 rental price is “grossly undervaluing” their movies.

While Fox ordered a 30 day delay, Universal Pictures insisted on a 45 day delay policy.  Redbox refused this deal.  So Universal cut them off altogether.  Redbox sued Universal for cutting them off and claimed that antitrust laws were broken.  In Delaware, a federal judge is expected to make a ruling.

Redbox is not prohibited on renting out DVDs that they purchase themselves because of the first-sale legal doctrine law.  According to the doctrine:

“Notwithstanding the provisions of section 106 (3), the owner of a particular copy or phonorecord lawfully made under this title, or any person authorized by such owner, is entitled, without the authority of the copyright owner, to sell or otherwise dispose of the possession of that copy or phonorecord.”

Sony will be selling its movies to Redbox for $460 million over the next 5 years.  Considering that Redbox vending machines has 17,900 kiosks and plans to launch an additional 8,500, that price is a bargain for what they would have to spend in retail stores.  Redbox is owned by Coinstar.

[via The Associated Press]

These studios believe that many of Netflix and Blockbuster’s customers would just burn the movies that they rent with the RealDVD software, thus causing them to lose out on a great deal of money.  The lawsuit was filed at the U.S. District Court in L.A. 

“The incentive for the consumer is obvious and all but overwhelming,” stated a request by the movie studios.  The request was for a temporary restraining order. “‘Why,’ he or she may ask, ‘should I pay $18.50 to purchase a DVD when I can rent it for $3.25 and make a permanent copy?’”

RealNetworks defends their software by saying it is legal.  RealDVD is sold for $30 per consumer at $20 for up to four licenses after that.  The software copy is locked into the original owner’s hard drive and does not alter the encryption technology used by movie studios already.  Copying one’s own personal copies of a DVD is “fair use” by law. 

The movie studios stated that RealDVD violates the Digital Millenium Copyright Act to bypass technologies that prevent the copying of a DVD without permission of the copyright owners.  The movie studios that are suing RealNetworks includes Viacom, Inc. (NYSE:VIA)’s Paramount Pictures, Sony Corporation (NYSE:SNE)’s Sony Pictures, News Corporation (NYSE:NWS.A)’s 20th Century Fox, General Electric (NYSE:GE)’s Universal, The Walt Disney Company (NYSE:DIS) studio, and Time Warner Inc. (NYSE:TWX) Warner Bros.

Warren Buffet’s advice was the best.

Information Source:
[1] Yahoo! Blog: Lemme give you a little advice by Nicki Dugan

“Blockbuster is committed to keeping pace with the changing needs of customers by offering them an expanding array of convenient ways to access entertainment content,” stated Jim Keyes, the Blockbuster Chairman and CEO. “Our acquisition of Movielink, with its associated digital content, is the next logical step in our planned transformation of Blockbuster. Now, in addition to the entertainment content we provide through our stores and by mail, we have taken an important step toward being able to make movie downloading conveniently available to computers, portable devices and ultimately to the television at home.”

Blockbuster won’t be changing the operations of Movielink but will be making elements of the service available on blockbuster.com.  Movielink was started in 2002.