Redbox Agrees to 28-Day Window

Redbox, the DVD rental company that offers movies for $1 a night, has reached an agreement with Warner Brothers and ended their lawsuit. Previously, Redbox has filed the suit claiming Warner Bros. had prevented wholesalers from selling new release movies to DVD rental establishments like Redbox.

The concern for Warner Bros. and other Hollywood studios was that the Redbox business model undercuts their revenue stream. The $1-day rental structure on new releases significantly cuts into the revenue earned by full sale prices of DVD titles. Aside from Warner, News Corp’s 20th Century Fox ad GE’s NBC Universal are also worried about the Redbox business model. Given Warner Bros settlement though, it is likely that the other studios will settle on a shorter window of days before allowing Redbox to feature new releases.

The recent agreement shares a lot of similarities to the settlement reached between Warner Bros. and Netflix. In each case both parties got what they wanted – at the expense of the consumer. In this settlement, Warner Bros. got the window of time it wanted, forcing Redbox to hold off offering new release title until 28 days after they come out on DVD.

If you’re wondering why Redbox agreed, the theory behind it was that Redbox will save money on the cost of the DVDs it buys. The company has even agreed to destroy the DVDs it acquires after their lifespan in the kiosks is over. Redbox also has access to a wider collection of Warner Bros. titles through this agreement.

Redbox President Mitch Lowe said that while there will always be people who want just-released DVDs; he believes the company can generate similar interests in month-old titles through various promotional methods.

For many DVD renters, this settlement does not look appealing. It drives up the cost if they prefer to watch only the newest releases. Some believe that the 28 day-window is too costly for Redbox despite the lower DVD price it gets. They say that main selling point for a kiosk that carries a limited supply of DVD titles is that it constantly showcases the latest releases. It looks like one result of the agreement is that online DVD rentals will remain in strong demand for consumers.