Let's Play Nice With Redbox

At least not every major Hollywood studio is hating on Redbox these days.

Viacom's (NYSE: VIA  ) Paramount and Coinstar's (Nasdaq: CSTR  ) army of Redbox kiosks announced yesterday that they will extend their revenue-sharing agreement through at least next summer, and possibly as far as the end of 2014.

Viacom's warm approach toward the master of overnight DVD rentals for a buck is a refreshing contrast to the legal barbs being volleyed between Redbox and Paramount's rival studios. Time Warner (NYSE: TWX  ) , News Corp.'s (NYSE: NWS  ) 20th Century Fox, and General Electric's (NYSE: GE  ) majority-owned Universal are trying to keep their new releases out of the automated machines. Fearing that Redbox rentals are eating into DVD sales, the studios want Redbox to wait a few months before stocking their latest home video releases.

Do the studios have a legitimate beef? Sure, DVD sales have tailed off during Redbox's ascent, but that could owe just as much to the popularity of video-sharing sites, cable programmers offering video on demand, and Netflix's (Nasdaq: NFLX  ) online streaming.

If Redbox is destroying the perceived value of the DVD, why are local multiplexes' revenues hopping, despite charging record ticket prices?

Besides, shouldn't Paramount's extension mean something? Viacom isn't stupid. It wouldn't cozy up to a company that might eventually put it out of business.

"The data from our initial trial period has been encouraging," said Dennis Maguire, worldwide president of Paramount Home Entertainment, in yesterday's announcement.

Traditional rental chains, on the other hand, have every reason to fear Redbox. It's a direct competitor with cutthroat pricing. Even Blockbuster (NYSE: BBI  ) is going head-to-head with Coinstar through its Blockbuster Express machines.

However, the studios have more to gain from working with Redbox -- and either realizing the joys of additional revenue streams, or improving the value of their DVD product -- than fighting against it.

Is Viacom doing the right thing by teaming up with Redbox, or is it sleeping with the enemy? Share your thoughts in the comment box below.

Netflix is a Motley Fool Stock Advisor selection. Try any of our Foolish newsletter services free for 30 days. That's less than a Redbox rental!

Longtime Fool contributor Rick Munarriz is surprised that the Winn-Dixie supermarket chain is the only retailer sporting Redbox kiosks in his hometown of Miami. He owns shares in Netflix and is part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


Read/Post Comments (6) | Recommend This Article (6)

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  • Report this Comment On December 15, 2009, at 1:31 PM, makeithappencapn wrote:

    "If Redbox is destroying the perceived value of the DVD, why are local multiplexes' revenues hopping, despite charging record ticket prices?"

    That statement is not sound logic. You are seemingly using out-of-home movie theater release information to compare in-home dvd rentals to in-home dvd sales (which compete against each other in the in-home movie viewing market) in an attempt to say those dvd sales aren't suffereing from red box's dvd rentals because you say the out-of-home movie theater's (who do not compete with redbox) ticket sales are doing well.

    That comparison is manipulative and makes no sense.

  • Report this Comment On December 15, 2009, at 1:32 PM, makeithappencapn wrote:

    "If Redbox is destroying the perceived value of the DVD, why are local multiplexes' revenues hopping, despite charging record ticket prices?"

    That statement is not sound logic. You are seemingly using out-of-home movie theater release information to compare in-home dvd rentals to in-home dvd sales (which compete against each other in the in-home movie viewing market) in an attempt to say those dvd sales aren't suffereing from red box's dvd rentals because you say the out-of-home movie theater's (who do not compete with redbox) ticket sales are doing well.

    That comparison is manipulative and makes no sense.

  • Report this Comment On December 15, 2009, at 3:24 PM, callyourbs wrote:

    "If Redbox is destroying the perceived value of the DVD, why are local multiplexes' revenues hopping, despite charging record ticket prices?"

    I respectfully ask the author to get basics of home entertainment right before posting on such an ignorant post on this highly visible website. There very little connection between the increase in box office at theaters and decline in the DVD market.

    This is the second time the author has done illogical comparision. in last 2 weeks. In my opinion it is irresponsible - just like some analysts are - to publish such poorly argued articles out. He should be using real numbers to explain. Sometime we readers are confused about the motive.

  • Report this Comment On December 15, 2009, at 4:09 PM, Fool wrote:

    "Besides, shouldn't Paramount's extension mean something? Viacom isn't stupid. It wouldn't cozy up to a company that might eventually put it out of business."

    Does this implie that Time Warner, News Corp and GE are stupid? Wow! Only one studio in Hollywood is smart.

  • Report this Comment On December 15, 2009, at 5:25 PM, Fool wrote:

    The main causes for retail DVD market contraction comes from two causes. First the and foremost the recession/depression of the last two years must be the main culprit. Some Ecomists project unemployment between 10.2 and 17%. If this the case you must assume discretionary spending to follow suit. Has DVD sales fallen more than unemployment. The answer is no. It takes No effort to get a reservation at the hottest restaurant or book a hotel in Aspen or Cabo. Should the hotels and restaurants blame rebox for this also. To quote Bill Clinton "it's the economy Stupid" who will the Studio's blame when the economy improves and sales return. By then they may have damaged one of the best little companies to have come along in many years.

  • Report this Comment On January 13, 2010, at 11:55 AM, Momof124 wrote:

    It's very simple. Money. Everyone wants a share of my money. The movies are too expensive for a family:

    tickets $42.00 popcorn/soda $32.00 = $74.00 for

    2 hrs of possible entertainment...money wasted if the movie stinks! DVDS run $20.00 to $25 at my local store. Cable movies are now 5.99 to 8.99 on my local cable channel and the BEST OPTION is REDBOX with the latest movies at an affordable price.

    Soon we will have no more free TV or public channels due to the cable companies and entertainment company greed. We have not been to the movies or rented DVD's from a national chain since redbox came out. Its no longer worth it...Think of all the REDBOX movies I can rent for $74.00....Now whose the fool?

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