In the United States, many of you will notice a big red box movie vending machine that allows you to rent a movie for a day at the price of $1. Up until now, Hollywood studios were willing to provide Redbox whenever there were new releases. However Redbox started selling the newly released DVDs for $7 on the open market after there were several rentals. The studios did not like this idea at all.
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]