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Warner Bros. takes aim at Netflix along with Redbox

August 13, 2009 |  4:40 pm

Netflix 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.

Redbox1 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.

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