By: Erik Gruenwedel
Redbox is better prepared than previously to acquire new-release titles from alternate sources on street date should Warner Home Video double the current 28-day delay to kiosks and other rental channels, an analyst said.
With the rental agreement between Warner and Redbox set to expire Jan. 31, 2012, B. Riley & Co. analyst Eric Wold doubts Redbox management would agree to a 56-day or longer embargo on new-release Warner titles — even with built-in per-unit discounts.
Warner titles represent about 15% of Redbox rentals, according to Wold.
The studio first implemented 28-day delays to kiosks — a strategy emulated by 20th Century Fox Home Entertainment and Universal Studios Home Entertainment — in an effort to bolster physical and digital sellthrough.
Warner now is aggressively promoting cloud-based digital locker UltraViolet — a platform that requires consumers purchasing, not renting, content. The studio recently said it would impose 60-day delays on new releases to LoveFilm in the United Kingdom in January.
Wold said consumers appear indifferent to the 28-day delay, and doubling the embargo will have little effect. Instead, he said the studio should keep (or eliminate) the 28-day window and raise the wholesale cost of titles to Redbox accordingly.
“We believe Redbox would be able to price away any potential impact on its cost structure,” Wold wrote in a Nov. 16 note.
Regardless, the analyst said Redbox is better positioned to acquire Warner titles from alternate sources, including retail, than it was in late 2009 when the studio first implemented the embargo.
Specifically, Redbox in 2009 was forced to create a workaround strategy during the winter holiday shopping season — a scenario it would not face in 2012. Rental agreements between Redbox and Fox and Universal expire in April 2012 and 2013, respectively.
Wold said Redbox has strengthened its disc rental prowess (and leverage with studios) since 2009 — a reality he said would help it acquire new-release titles at both wholesale and retail channels. He said a new workaround program could also focus on high marquee titles as opposed to lesser-known titles included in studio rental agreements.
“They've been working on a long-term workaround strategy for the past two years in anticipation of this as opposed to the overnight rush during the holiday season with three studios they had to put into place in late 2009,” he said in an email.
Article Link: http://www.homemediamagazine.com/redbox/analyst-redbox-better-prepared-than-others-possible-warner-embargo-expansion-25680