Warner Bros. takes aim at Netflix along with Redbox

The news that Warner Bros. will attempt to limit new release rentals at fast-growing DVD rental kiosk company Redbox doesn't exactly merit a big headline.

What does, however, is that the studio also wants to put the squeeze on Netflix.

The Time Warner-owned studio announced today that it is seeking new deals with kiosk operators and mail-order subscription companies, not-too-subtle code for Redbox and Netflix, the leaders in both categories, respectively.

In a brief statement, Warner Bros. said Redbox and its competitors will have to wait 28 days after DVDs launch to offer new releases. It is imposing the same restriction on subscription rental companies like Netflix unless they agree to "a day-and-date revenue-sharing option."

Like every major studio, Warner Bros. has a revenue-sharing agreement for some of the movies it rents through Netflix. It's apparently seeking a more lucrative deal as Netflix continues to grow amid an overall declining home entertainment market.

"We’ll evaluate the current proposal and discuss it with the studio, which is what we’ve always done," Netflix vice president of corporate communications Ken Ross said.

Warner Bros. is the first studio to attempt to renegotiate is deal with Netflix recently. Its public move could be a sign that other studios will be looking to Netflix to help make up for declining revenues from DVD sales and retail rentals.

The 28-day window for new releases that Warner is imposing on DVD kiosk companies is slightly shorter than a 30-day one imposed by Twentieth Century Fox last week. Late last year, Universal ordered its wholesalers to wait 45 days before giving new movies to Redbox.

Universal is amid a legal battle over the issue with Redbox, which has been purchasing the studio's DVDs more expensively through retail outlets since then. Earlier this week Redbox sued Fox for the same reason. If history is a guide, it will likely file a suit against Warner Bros. soon too.

All of those studios are concerned that Redbox's $1-per-night rentals are undercutting more lucrative rentals from other services and DVD sales. On a conference call after the conglomerate's most recent quarterly report, Time Warner CEO Jeff Bewkes compared Redbox to theaters that show movies several months after they premiere: "In general, we think there may well be a role for $1 rental kiosks," he said, "just like $1 movie theaters."

Lions Gate Entertainment and Sony Pictures, meanwhile, both recently signed five-year deals with Redbox worth over $200 million and $460 million, respectively, to guarantee that they will provide their discs to the company.

Paramount Pictures has yet to take a stand on the issue, while Walt Disney Pictures is giving Redbox its DVDs without a formal agreement.

In its statement, Warner Bros. said its home video department has decided to engage "solely in direct relationships with kiosk and mail-order subscription vendors" to offer "business options that will allow all parties to grow their respective businesses."

-- Ben Fritz

Related:

Redbox CEO: We have a negligible effect on DVD sales

Redbox sues 20th Century Fox over DVD releases

Lions Gate plays nice with Redbox for $158 million

Fox to Redbox: Hands off our movies for 30 days

Redbox revenue more than doubles, testing new pricing models

Hollywood hoping Redbox will be the DVD version of $1 movie theaters

Netflix revenue up 20% as rentals boom in the recession

Photos: A Netflix envelope. Credit: Paul Sakuma, AP. A Redbox kiosk in Santa Monica. Credit: Lawrence K. Ho, Los Angeles Times.

Comments

[dawn]

well if they make me wait 30 days or longer i'll cancel my netflix quit going to bedbox and just go rent itat my local video store i still would not buy it till i see it first and like it enough to add to my libary people are doing the best they can and if that means renting a movie over owing it to save money then thats what we have to do

[Roy]

So why aren't the studios trying to impose the same delay window on Blockbuster, et al? Blockbuster rents for a week for $2.99, which is about half what Redbox gets. Indy video rental stores are in the same ballpark. And Netflix is around $1.12 if you obtain the maximum throughput for the $8.99/mo plan (which is questionable, given Netflix's known propensity to throttle high-volume customers). It just seems to me that the studios want to force rental customers into storefronts, while customers want to have more convenient options. Do the studios make that much more on the storefront rentals?

[Moon Man]

I don't get it.... If people rent from Netflix or Redbox the studio STILL earns some money.... If people DON'T rent the movie, they get NO money. Isn't the point of being in business to MAKE MONEY???

Now, Time Warner I can sorta see... as they charge an obscene $4.99 (aroundabouts, I'm not in their area) to rent on VOD through their cable system, and if people can get it for a buck why pay their outrageous hyperinflated price... but that's TIME WARNER. I'm not sure how the hierarchy works between them and Warner Brothers.. which company is the Parent Company.... but anybody else?? What purpose does that serve them?

I have Netflix, but I don't actually use the DVD portion... I stream all my movies which are usually older to begin with.

[Moon Man]

oops... just looked again, and TW does own WB... so that's why THEY'RE doing that... but what about making money from non-cable peeps and those in NON-TW areas?

[Art Brown]

Time Warner is going to eat it, cause guess what, I'm hooked on Redbox, along with alot of other peeps. Have you been in a blockbuster lately? Last time I went, on a Friday night last june, there were 5 people in the store, and in 20 minutes probably three people checked out a flic. But the next weekend I was in line at redbox, where 7 people ahead of me checked out 2 or sometimes 3 movies. And then there were probably the same number of people behind me when I left. Blockbuster is an expense producing machine, with employees to pay, stores to rent, etc, while redbox (and netflix) are masters of profit. As long as Time Warner is dancing with the blockbuster crowd, they are going to literally bust. It will just turn out that we americans will watch more Sony movies. If TW thinks they have a monopoly on talent, their probably smoking the good stuff. Sell your stock now, if you were ever dumb enough to own any.