Entertainment Industry

Category: Blockbuster

Redbox agrees to buy NCR/Blockbuster kiosks as revenue surges

Redbox used to charge $1 per night for DVD rentals.DVD sales may be in a tailspin, but consumers still love cheap rentals.

That evidence was clear Monday as Redbox, the nation's largest DVD rental company, agreed to spend up to $100 million to acquire Blockbuster-branded DVD kiosks operated by its largest rival, NCR Corp., adding about 9,000 machines to its existing 35,400.

The deal was announced the same day that Redbox's parent company, Coinstar Inc., reported that revenue for the $1.20-per-night DVD rental business surged 40% during the final three months of 2011 to $445.6 million and 35% for the year to $1.56 billion.

Redbox's operating income surged 43% during the fourth quarter to $76.6 million and 50% for the full year to $284.9 million, according to financial results released Friday.

Combined DVD and Blu-ray sales, meanwhile, dropped 12% last year in the U.S.

Some other companies have seen rentals drop as well. Blockbuster Inc., for instance, filed for bankruptcy reorganization in late 2010 and shut thousands of stores before being acquired last year by Dish Network, which is closing additional locations.

Netflix lost 2.76 million DVD subscribers in the fourth quarter and is shifting its focus to streaming.

Redbox's decision to invest further in the kiosk business -- and to make DVD rentals part of a new subscription streaming offering it will launch with Verizon later this year -- indicates it has a different view.

“It’s a testament to the fact that we believe in the physical space,” Coinstar Chief Executive Paul Davis said.

In addition to strong consumer demand, Redbox attributed its improved performance to a price increase last fall to $1.20 per night from $1, the installation of about 5,000 new kiosks and the addition of video game rentals.

On a conference call with Wall Street analysts Monday, Davis said Redbox intends to rebrand NCR's Blockbuster kiosks with the Redbox name but has yet to determine how many of the 9,000 kiosks it will continue operating. The company is awaiting regulatory approval for the purchase, which is expected to occur by this year's third quarter.

In large part because of the stronger-than-expected performance by Redbox, Coinstar stock surged 17% in after-hours trading Monday. Before financial results were released, the shares closed up 2% at $50.56.

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-- Ben Fritz

Photo: Redbox kiosks charged $1 per night for DVD rentals before last fall's price increase. Credit: Justin Sullivan / Getty Images

Redbox, Warner Bros. headed to war over new DVD delay

Warner Bros. and Redbox are about to re-ignite a battle over how long consumers have to wait to rent DVDsThis post has been updated. See the note below for details.

Warner Bros. and Redbox are about to re-ignite a battle over how long consumers have to wait to rent DVDs.

The Time Warner Inc.-owned studio is instituting a new policy that all DVD rental outlets must wait 56 days from the time the disc goes on sale at retail outlets Wal-Mart and Best Buy until consumers can rent them, according to people with knowledge of the matter who were not authorized to discuss it publicly. That's double the current 28-day "window."

A spokesman for Warner Bros.' home entertainment division declined to comment. But executives at the studio have previously said they were seeking a longer delay, which they believe will help boost flagging DVD sales and video-on-demand, both of which are more profitable than disc rentals.

Netflix has agreed to abide by the 56-day delay, one of the people close to the situation confirmed. 

However, Redbox will wait no longer than 28 days to rent discs, interim President Gregg Kaplan said in an interview this fall. A spokeswoman confirmed Friday that the company's position has not changed.

That means the $1-per-night kiosk company will no longer be able to get discs directly from Warner Bros. but will have to buy them in bulk from retail stores. Redbox did the same thing in 2010 when the parties were in a similar fight. Illinois-based Redbox ultimately agreed to the 28-day delay.

The new policy, expected to be announced next week at the Consumer Electronics Show in Las Vegas, is to take effect Feb. 1, the day after Warner Bros.' current deals with Netflix and Redbox expire.

It's also expected to extend to the nation's third-largest rental outlet, Blockbuster.

[Updated, 2:18 p.m., Jan. 6: A person familiar with the thinking of executives at Blockbuster said it too will not accept the 56-day delay and will buy Warner Bros. DVDs through alternative means.]

Previously, Blockbuster was the only major DVD renter that offered discs the same day they went on sale, an advantage studios gave the struggling company as it went through bankruptcy last year and was ultimately bought at auction by Dish.

Warner Bros.' new policy could soon be adopted by Universal Pictures. That studio's agreements with Redbox and Netflix, which include a similar 28-day delay, expire in April.

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-- Ben Fritz

Photo: Anja Murphy returns videos to a Redbox kiosk in an Albertsons supermarket in Santa Monica. Credit: Lawrence K. Ho / Los Angeles Times

Warner Bros. withholds films from Blockbuster

BlockbusterStory
Warner Bros. doesn't want to make it a Blockbuster night.

The studio has said it will no longer authorize the video store chain to carry its new movies when they are released on DVD. At issue is Warner Bros.' desire to have outlets such as Blockbuster offer its films only for sale for the first 28 days of release before allowing consumers to rent titles. Netflix and Redbox also have to wait 28 days before offering Warner Bros. titles for rent.

Warner Bros. has long enforced this policy with Redbox and other outlets, but this marks the first time it has played hardball with Blockbuster, which was recently sold to satellite broadcaster Dish Network.

That Warner Bros. made this move soon after Blockbuster announced plans to create its own online streaming service to compete with Netflix is no coincidence. When Blockbuster was strictly a retail outlet, Warner Bros. was friendlier toward it because it wanted the video chain — which has struggled financially — to survive and compete against Netflix and Redbox.

Blockbuster is apparently taking matters into its own hands and buying up copies of Warner Bros. releases to stock the shelves in its stores. A spokesman for Dish declined to comment.

Warner Bros. has indicated that it will seek to increase the length of the 28-day window with Netflix and Redbox when it negotiates new deals with the two companies later this year.

The Financial Times first reported this story.

— Joe Flint

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Photo: Blockbuster storefront in Dallas, Texas. Credit: LM Otero / Associated Press.

Dish and Blockbuster to offer new service to challenge Netflix

BlockbusterLogo
Seeking to challenge Netflix without undermining its own satellite television business, Dish Network has launched a new service, available only to its television subscribers, that will stream movies and TV and send DVDs by mail under its newly acquired Blockbuster unit.

Called "Blockbuster Movie Pass," the service includes DVDs and video games by mail along with 3,000 movies and television shows available to stream on TV and an additional 1,000 for computer. It will launch Oct. 1.

The offering costs $10 per month, the same price that Netflix previously charged for a combined streaming and DVD service before it unexpectedly raised the price in July, leading to a public outrage and the loss of an expected 400,000 subscribers by the end of September.

To entice new Dish subscribers, the Blockbuster Movie Pass will be free to them for the first year.

Because the new offering is only available to people who subscribe to Dish for at least $39.99 per month, its appeal may be low to those who are currently happy with their cable or DirecTV services or already use Netflix alone.

Dish Network, which has 14 million subscribers, acquired Blockbuster for $320 million in April at a bankruptcy court auction.

At a news conference held in San Francisco, Blockbuster President Michael Kelly said the company is working on a similar subscription offering for non-Dish subscribers that will launch in the future.

Acquiring movies and TV shows for such a service is costly, however, as Netflix investors have learned. But because Blockbuster Movie Pass is tied to a Dish subscription, the company can offer content to which it already has the rights to through program deals for its satellite TV business.

Netflix currently offers more than 12,000 movies and TV shows for its streaming subscribers, significantly more than Dish has. It also has signed some exclusive agreements for series like "Mad Men" and movies from independent studios including Relativity Media.

But Blockbuster Movie Pass will have a key advantage: Walt Disney Studios and Sony Pictures movies from Starz, which recently announced it will end its Netflix agreement when it expires in February. The Dish-Blockbuster offering will also have Paramount Pictures, Lionsgate, and Metro-Goldwyn-Mayer films from those studios' pay channel Epix, which also provides content to Netflix.

Blockbuster's television shows will come from networks including Fox, A&E, TNT and AMC.

In addition to getting DVDs, Blu-ray discs and video games through the mail, subscribers will be able to swap discs at the more than 1,500 Blockbuster stores still operating in the U.S.

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-- Ben Fritz

Photo: Blockbuster logo. Credit: Dish Network

Wal-Mart adds streaming video to its website

Photo: A screen shot of the film "True Grit" is shown as one of the titles available on Wal-Mart's new video-streaming service. Credit: Associated Press / Wal-Mart Stores Inc. Wal-Mart Stores Inc. has added streaming movies to its website as the world's largest retailer attempts to grab a bigger share of the online movie market from rival service Netflix Inc.

The decision to offer movie sales and rentals through Walmart.com comes just two weeks after Netflix raised prices for the majority of its customers. The price hike provoked howls of protest from consumers and disappointing subscriber growth projections, leading to a significant drop in Netflix's stock price.

Wal-Mart, long the nation's leading seller of DVDs, signaled its intent to double down on digital movie distribution in February 2010, when it spent a reported $100 million to acquire Vudu, a Silicon Valley start-up that was gradually being added to home entertainment devices.

Since the acquisition, Vudu has been able to leverage the giant retailer's clout with manufacturers to incorporate is service into more than 300 consumer electronics products, including Internet-connected television sets, Blu-ray disc players and the Sony PlayStation 3 game console.

This spring, Vudu began offering movie rentals and purchases via the Web, through Vudu.com, positioning the service to better compete with the likes of Amazon.com, Apple Inc.'s iTunes or Blockbuster.

Offering 20,000 movie titles for rental and purchase through Wal-Mart's website, which attracts about 40 million monthly visitors, is a further step in that direction. It better positions the retailer to take on established online players, as well as traditional competitors such as Best Buy, which last may bought digital video service CinemaNow.

On Wal-Mart's website, the movies will be available the same day the DVDs go on sale in stores. Rental prices range from 99 cents to $5.99. Digital purchases are priced from $4.99 to $24.99.

Walmart.com general manager Steve Nave said the retailer is following its customers as they increasingly embrace digital movie rentals and purchases.

"We know customers are starting to shift their behavior, in terms of how they consume their media," Nave said, adding, "As as customers make that change, we don't want to lose that customer as they shift to digital."

Wal-Mart has been a laggard in the digital space, vying for third place with Sony's PlayStation Store and Amazon's Video-on-Demand. Its Vudu service currently accounts for fewer than 10% of all transactions -- and even less revenue, because of its 99 cent promotions, according to researcher IHS Screen Digest.

"iTunes is the market leader in this field, accounting for approximately 65% of all movies and TV shows bought or rented over the Internet," said Arash Amel, IHS's digital media research director.

Amel doubts that incorporating the Vudu service on Wal-Mart's site will move the needle, in terms of market share. Consumers have shown through the failures of other services that they don't want to watch movies on computers.

"The real strategic significance here is this is the fist step in the retailer trying to once more figure out how online video can add any meaningful value to the e-commerce components of its core business of physical goods," Amel said.

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-- Dawn C. Chmielewski

Photo: A screen shot of the film "True Grit" is shown as one of the titles available on Wal-Mart's new video-streaming service. Credit: Associated Press / Wal-Mart Stores Inc.

NCR sues Blockbuster trust to continue using the chain's name on kiosks

The new owners of Blockbuster Inc. are in a fight with a company that licenses the name for movie rental kiosks.

NCR Corp., which was recently told by Blockbuster parent Dish Network Corp. that the satellite broadcaster was terminating their 2-year-old agreement, has sued for the right to continue to use the name Blockbuster Express on its vending machines that allow consumers to rent and buy DVDs.

The suit, filed in U.S. District Court in Delaware on Friday, is seeking to prevent the loss of the Blockbuster name on about 9,000 kiosks in grocery and convenience stores throughout North America. The suit alleges that the BB 2009 Trust,  which was set up to administer Blockbuster's intellectual property rights, lacks the grounds to end the agreement.

The Duluth, Ga., company also seeks the court's finding that NCR's continued use of the Blockbuster name, under terms of the license agreement, would not constitute trademark infringement, according to the filing.

"We believe that Dish’s position is invalid and unenforceable," said NCR spokesman Jeffrey Dudash. "We filed a lawsuit in Delaware to confirm that the termination is ineffective."

A Dish Network spokesman declined to comment on the lawsuit. 

Under Bankruptcy Court rules, Dish has the right to accept or reject existing Blockbuster contracts, including leases on various physical store locations.

-- Dawn C. Chmielewski

 

 

 

Blockbuster switches to Redbox-style single day rental pricing

The days of the multi-day movie rental are officially over.

Blockbuster Inc. announced Friday that it is switching to single-day pricing in a bid to better challenge its fast-growing competitor Redbox. It's the first significant change at the struggling rental and retail chain since it was acquired by Dish Network in April for $320 million and a longtime executive of the satellite broadcaster was put in charge.

New releases will cost $2.99 the first day, while older films are $1.99 the first day. All movies will cost 99 cents for additional days. That's more than the 99 cents per day that Redbox charges for rentals every day, including the first.

Previously, Blockbuster charged $4.99 for a three-day rental.

By charging more for the first day, Blockbuster will be able to maintain what has been its one significant advantage over Redbox and its other, larger rival, Netflix: New releases from major studios available to rent the same day they go on sale. 20th Century Fox, Universal Pictures and Warner Bros. all restrict Redbox from renting their DVDs until 28 days after they go on sale because they believe 99 cents is too low a price for a first-night rental.

Those three studios, along with Sony Pictures and Walt Disney Studios, also place similar restrictions on subscription rental service Netflix.

Despite expectations that Dish would move to close many of Blockbuster's retail locations, only a handful of the 1,700-plus it took control of in the sale have shut down. A spokesman for Dish said the company is still considering how many to keep open and that the decision rests in part on negotiations occurring with studios over the terms under which it obtains DVDs.

Dish has yet to details plans for a Blockbuster-branded digital offering to compete with Netflix's online streaming service that people close to the company said was part of the rationale for the purchase last month.

-- Ben Fritz

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Dish Network names Michael Kelly president of Blockbuster

Dish Network to acquire Blockbuster for $320 million

Dish Network names Michael Kelly new president of Blockbuster

Dish Network Corp. named Michael Kelly president of Blockbuster, the struggling video chain whose assets it acquired last week. 

The announcement came ahead of Monday's earnings call, when investors are hoping to learn more of Dish Network's plans for Blockbuster. The pay-television operator paid $233 million in cash and assumed $87 million in liabilities and obligations. 

Dish Network has indicated in private conversations that the satellite operator hopes to use Blockbuster's brand name and online assets to build a movie service that could compete with fast-growing Netflix. In a recent call with Wall Street analysts, Dish Chief Executive Charlie Ergen said some customers were canceling their subscriptions to premium channels such as HBO in favor of streaming movies and TV-show reruns on Netflix.

Kelly has served as executive vice president of Dish Network’s commercial services division, overseeing sales. He has held various executive positions within the company, including management of field service, customer care operations and strategic initiatives. He joined Dish in 2000, when it acquired his company, Kelly Broadcasting Systems, a distributor of international radio and television programming in the United States. 

“Blockbuster can offer more movies to consumers in more ways than any other distributor,” Kelly said in a statement, noting he looked forward to reinvigorating the brand that allowed consumers access to "movie and game titles available from Blockbuster’s neighborhood stores, by-mail service and digital library.”

-- Dawn C. Chmielewski

Dish Network to keep about 600 Blockbuster stores open

Don't count your corner Blockbuster store out quite yet.

The struggling rental chain's soon-to-be owner, Dish Network, filed documents with Bankruptcy Court over the weekend listing certain stores it intends to keep open. They total about 600, according to a report in the Dallas Morning News.

The company currently operates 1,751 U.S. stores, most of which are expected to be shuttered under Dish Network. The Wall Street Journal reported that the current number of store leases that won't be picked up by Blockbuster's new owners is now close to 1,000.

In its heyday, Blockbuster operated more than 4,000 stores.

Dish Network has yet to reveal the fate of every store or the exact number it plans to operate. However, people familiar with the situation have said the satellite TV provider intends to keep some retail footprint and also use Blockbuster's brands and assets to create an online operation to compete with Netflix.

Dish's $320-million acquisition of Blockbuster is expected to close Thursday.

-- Ben Fritz

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Dish Network to acquire Blockbuster for $320 million

Dish Network's Blockbuster bid gets approval from bankruptcy judge

Dish Network's $320 million offer for fading movie rental chain Blockbuster Inc. was given the thumbs up by a U.S. bankruptcy judge.

The approval starts a new chapter for Blockbuster, once a giant in the entertainment industry with its huge chain of stores around the nation, which fell into dire straits with the growth of Netflix and Red Box.

Dish Network, a satellite broadcaster with 14 million subscribers, has not said much about its plans for Blockbuster. Dish, like other pay-TV distributors, is also facing intense competition from new delivery platforms.

On Wednesday, Dish executive vice president Tom Cullen said, "With its more than 1,700 store locations, a highly recognizable brand and multiple methods of delivery, Blockbuster will complement our existing video offerings while presenting cross-marketing and service extension opportunities for Dish Network."

Dish beat out several rival bids, including one from investor Carl Icahn.

-- Joe Flint

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