As rumors fly that Warner is trying to delay new releases in Redbox kiosks by more than two additional weeks, one analyst is suggesting they are overestimating their leverage.
The introduction of 28 day delays between the time titles are released for sale and when they are offered for rental is a scheme the studios came up with in 2009. It is intended to be an incentive for consumers to buy discs which can't yet be rented.
Although Netflix was the first company to agree to these windows, Redbox was the studios' primary target because of their presence in major retail chains. Not surprisingly, disc sales have not made the resurgence predicted by the studios.
The deals were pushed through largely by backroom deals between the studios and companies supplying discs to rental outlets. According to Eric Wold, an analyst with B. Riley & Co, over the last several months Redbox has worked out a strategy to get around those arrangements.
Home Media Magazine recently reported about an investor note in which he wrote:
Wold went on to say Redbox's new, alternative arrangement would allow them to offer a selection of the most popular new releases without Warner's blessing, and while their cost per disc would rise, ultimately so would their profits.
In other words, both the carrot and the stick used by Warner to entice Redbox into making their current deal will likely be inadequate to convince the kiosk giant to extend it. Ultimately that's the best thing for consumers who are currently being punished for Hollywood's greed.
What will happen next is anyone's guess. Hollywood's history suggests Warner will make demands up until the last minute and perhaps offer a bigger discount to get what they want. However, the lure of offering new releases before pretty much every other rental outlet may be too much to overcome.
Although Netflix was the first company to agree to these windows, Redbox was the studios' primary target because of their presence in major retail chains. Not surprisingly, disc sales have not made the resurgence predicted by the studios.
The deals were pushed through largely by backroom deals between the studios and companies supplying discs to rental outlets. According to Eric Wold, an analyst with B. Riley & Co, over the last several months Redbox has worked out a strategy to get around those arrangements.
Home Media Magazine recently reported about an investor note in which he wrote:
While Redbox was forced into a workaround two years ago on minimal notice, the workaround plan developed since that time has been developed as a long-term replacement to a studio agreement (with copyright law in the company's corner).
Wold went on to say Redbox's new, alternative arrangement would allow them to offer a selection of the most popular new releases without Warner's blessing, and while their cost per disc would rise, ultimately so would their profits.
In other words, both the carrot and the stick used by Warner to entice Redbox into making their current deal will likely be inadequate to convince the kiosk giant to extend it. Ultimately that's the best thing for consumers who are currently being punished for Hollywood's greed.
What will happen next is anyone's guess. Hollywood's history suggests Warner will make demands up until the last minute and perhaps offer a bigger discount to get what they want. However, the lure of offering new releases before pretty much every other rental outlet may be too much to overcome.
