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Fox to Redbox: Hands off our movies for 30 days

August 5, 2009 |  5:44 pm

Redbox2 20th Century Fox is thinking outside the box. Redbox, that is: The studio has just told the DVD kiosk company that it can't have DVDs on launch day.

Fox has instructed its DVD wholesalers not to sell discs to Redbox -- which is owned by Coinstar Inc. -- or other DVD kiosk companies until 30 days after they are released.

Many studios are wary of Redbox, whose business has doubled in the last year, because its kiosks rent out DVDs for just $1 per night. That undercuts stores with higher rental prices, Netflix and disc sales. All three carry significantly higher margins than studios can get even through a revenue-sharing agreement with Redbox.

Fox's move follows Universal Pictures' efforts to cut off Redbox. Universal is in court with Coinstar after telling wholesalers to cut off Redbox unless it agreed to a similar 45-day window. After today's move, Fox could also find itself in a legal dust-up with Redbox.

Sony Pictures is the only studio so far to reach an agreement with Redbox. Its deal guarantees revenue of $460 million over five years. Fox apparently decided that such an agreement wouldn't be acceptable.

"The basis of this position is to continue to provide the consumer with broad title choice and access to Fox movies while maintaining the quality image and value perception of Fox movies," a studio spokesperson said in an e-mailed statement. "Our desire is to maintain for Fox movies a thriving network of distribution serving all types of consumer preferences, on reasonable business terms for Fox as well as our distribution partners."

In a conference call with analysts and media earlier today after its fourth-quarter report, Chase Carey, president and chief operating officer of Fox's parent company News Corp., spoke more directly on the topic.

"Having our [movies] rented at $1 in the rental window is grossly undervaluing our products," he said.

Last week, Time Warner CEO Jeff Bewkes compared Redbox to $1 movie theaters to $1 movie theaters and said Warner Bros. movies "probably" shouldn't be available through kiosks until well after they first go on sale.

It's possible that Redbox will continue to offer Fox DVDs by purchasing them at retail, as it has done with Universal releases.

A spokesperson for Redbox did not have an immediate response to the move.

Update (Aug. 6, 10 AM): Mitch Lowe, president of Redbox, issued a statement in response to Fox's decision indicating that he has no intentions of agreeing to the studio's demands: "We were informed of Fox’s position late today.  Redbox stands behind our convenience and value that we offer consumers, and we’re pleased to make DVDs available the day they are released."

-- Ben Fritz

Photo: A Redbox kiosk in an Albertsons supermarket in Santa Monica. Credit: Lawrence K. Ho / Los Angeles Times

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