Media Money with Julia Boorstin

Progress in the DVD Wars: Warner Brothers and Redbox Strike a Deal

After nearly six months of litigation Warner Bros. Home Entertainment Group and Redbox today struck a deal. Redbox, which rents DVDs for $1 a day from kiosks in big box retailers and pharmacies, was locked in a standoff with Warner Bros., which has the largest home entertainment marketshare of any of the studios. In this new deal Redbox agrees to a 28 day window after DVDs go on sale before it starts offering those films in its kiosks.

The two companies are portraying it as a win-win. Redbox gets to buy Warner Bros. movies directly from the company, as opposed to on the pricier retail market, and it is guaranteed sufficient supplies of hot titles. Not to mention the fact that Coinstar, Redbox's parent, gets to stop pouring millions into litigation. Warner Bros. gets to protect DVD sales and Video-on-demand revenues for the first month after DVDs hit the market. And Redbox promises not to dump old releases in the re-sale market, now promising to destroy DVDs after their time in kiosks is done. This follows a similar deal Warner Bros. struck with Netflix, the DVD rental-by-mail service also agreed to a 28-day window for new releases.

Since Warner Bros. controls so much of the DVD market, this Redbox deal could be precedent-setting. In addition to suing Warner Bros., Redbox also sued Universal Studios and 20th Century Fox, when they refused to allow the rental company to access its new releases. The studios don't want easy, cheap access to new releases to keep movie fans from picking up DVDs from Best Buy or Wal-Mart.

Too much money is at stake for the DVD rental players to refuse to play ball with the studios. And it's worth it for the movie studios to stick to their guns and insist on a delay before DVDs are available to inexpensively rent. DVD sales are in continual decline and the movie studios need to do whatever it takes to protect this crucial revenue stream for as long as possible.

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