Redbox has removed one of big overhang on its business. The company settled a lawsuit with Warner Bros. Home Entertainment Group over the DVD release window and cut a multiyear distribution deal.
For Redbox---and its owner Coinstar---the deal allays a lot of concerns. Coinstar's guidance on its most recent quarter was tempered over worries about DVD costs.
In a statement, the companies said Redbox will make all Warner Bros. DVD titles available after a 28-day window. Redbox also ended its lawsuit against Warner Home Video. Simply put, Redbox cut roughly the same deal Netflix cut to get access to library titles.
Add it up and upstarts like Redbox and Netflix are playing ball with Hollywood's release window schedule. Why? There's a lot of money at stake.
Like Netflix, Redbox's growth has been off the charts.
For 2009, Coinstar reported revenue of $1.1 billion, up 50.3 percent from a year ago. Redbox accounted for $773.5 million of that sum, up 99.1 percent from a year ago.
Given the growth Redbox is seeing it doesn't make much sense to go into a religious war with Hollywood over DVD release windows.
Indeed, Kevin Tsujihara, president, Warner Bros. Home Entertainment Group. said:
The 28-day window enables us to get the most from the sales potential of our titles and maximize (video on demand) usage.
Redbox president Mitch Lowe also said his company benefits:
By agreeing to a delayed release date, redbox can now acquire Warner Home Video titles at a reduced product cost, preserving value for our consumers and increasing customer access to Warner titles at redbox locations nationwide.
Simply put, everyone is happy when everyone is making some nice coin.
Redbox is likely to see a financial benefit. It will get DVDs at lower costs and ensure that its kiosks are well stocked. The release window agreement kicks in March 23 and will run through Jan. 31, 2012.
Coinstar shares moved higher in after hours trading.