Mum's the word
Lancina says that, thus far, Universal is the only studio to approach redbox in an attempt to limit its movie offerings. Other motion picture studios have remained silent on the issue. SelfService.org contacted Warner Brothers Entertainment Inc. and Paramount Pictures, but both declined to comment.
The Motion Picture Association of America – an advocacy group that represents the interests of the motion picture industry – also was contacted, but an MPAA representative referred all inquiries back to Universal Studios.
Lancina says he suspects Universal has approached other DVD kiosk operators in an attempt to persuade them to sign similar agreements, but he would not provide details.
DVDPlay reacts
Charlie Piper, president and chief operating officer of DVDPlay Inc., says his company is among those contacted by Universal. Shortly after redbox failed to comply with Universal's terms, Piper says DVDPlay received a call from VPD in which the distributor indicated that it could no longer supply them with Universal DVDs.
At that point, Piper says Universal was unwilling to compromise with any of the kiosk operators unless they were willing to sign the agreement.
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"We will not sign the revenue sharing agreement. It doesn't work for us. We still plan on having the titles available in our kiosks and we have alternative plans to make sure that we have those available."
- Charlie Piper
DVDPlay
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"It was clearly laid out to freeze out the kiosk business," Piper said.
Piper says that, like redbox, DVDPlay will not bow to Universal's demands.
"We will not. We will not sign the revenue sharing agreement," Piper said. "It doesn't work for us. We still plan on having the titles available in our kiosks and we have alternative plans to make sure that we have those available."
Piper says that his company will purchase the Universal DVDs from retailers like Wal-Mart, if necessary. He also said that, although DVDPlay is steering clear of a legal battle right now, his company is willing to take it to the courts if necessary.
CLICK BELOW TO LISTEN TO PIPER DISCUSS DVDPLAY'S OPTIONS.
"There are movies there that our customers want to see," he said.
Losing ground
Some self-service advocates argue that Universal is using strong-arm tactics in an effort to keep its foothold in an industry that's drastically changing with the times. Davis Freeburg, a blogger who regularly covers the digital entertainment industry, says Universal's actions betray a hint of desperation.
"Universal is losing on the pricing front," Freeburg said. "They're basically having somebody sell things for $1 that, in the past, they've been able to get away with charging $3 or $5 for. No one is going to pay $10 for a DVD if you can go and just rent the movie from redbox for 99 cents for one night."
The relatively cheap prices offered by DVD kiosks, Freeburg says, is causing some potential DVD purchasers to rent instead, which means less revenue for companies like Universal.
CLICK BELOW TO HEAR FREEBURG EXPLAIN WHY REDBOX RENTALS ARE SO CHEAP.
Freeburg says it's unfair for Universal to place limitations on self-service kiosks that don't exist for brick-and-mortar retailers like Blockbuster, arguing that what redbox does with the DVDs it purchases is its business.
"It's very clear that, if you buy a DVD, you can do what you want with it," Freeburg said. "You're allowed to go and rent it to other people. You're allowed to sell it to your friends. You can give it to your friends and they can give it to their friends and 100 people could watch it. It's all legal because we have fair-use rights when it comes to DVDs."
The licensing factor
But not everyone in the self-service space is lining up to support companies like redbox.
Todd Rosenbaum, chief executive of Polar Frog Digital, an operator of DVD burn-on-demand kiosks and a competitor of redbox, says the company doesn't have a leg to stand on. He says, unlike brick-and-mortar retailers, redbox doesn't pay licensing fees to the studios.
"Redbox just goes and buys closeouts of products and turns around and rents them and doesn't give the studios revenue share," Rosenbaum said. "That isn't how Netflix works. That isn't how Blockbuster works. They [Redbox] tried to circumvent the system."
CLICK BELOW TO HEAR ROSENBAUM DISCUSS LICENSING FEES.
Redbox was contacted but declined to comment on whether or not it pays licensing fees to Universal.
Piper says that, although his company doesn't pay licensing fees, it makes up for this difference by providing advertising on its kiosks for the studios, including movie trailers and posters, though he admits that there is no formal agreement that these services are provided in lieu of licensing fees.
Rosenbaum says he thinks Universal will prevail against Redbox's lawsuit and the victory will signal a shift in the way DVD rental kiosks operate.
"I think more studios will jump on board with that litigation against them [redbox]," he said. "I think that's a valid concern of theirs."
Universal had until Nov. 3 to file court documents responding to the allegations made in the redbox lawsuit. According to the clerk's office at the U.S. District Court in the District of Delaware, that paperwork has not been filed at the time of this writing. Court dates have not yet been scheduled.
The deadline by which Universal threatens to cut off commercial sales to redbox is Dec. 1.
