This story was written by Tameka Kee.
The battle between the movie studios and new movie rental services (like Redbox and Netflix—but not Blockbuster) is quickly evolving into a full-blown war. Warner Bros. has joined Universal and Fox in trying to keep movies out of Redbox kiosks until about a month after their release date—but it doesn’t stop there.
The studio is also renegotiating its deal terms with Netflix (NSDQ: NFLX) with the goal of imposing the same new release delay; that’s in addition to banning DVD wholesalers from selling to either kiosk or mail-order rental companies directly (per Video Business).
Redbox will most likely respond to Warner Bros.’ new terms with a lawsuit, like it has just done with Fox. More interesting will be how Netflix handles the news.
The company has been riding high on a steady flow of new subscribers, and during its Q2 earnings call, CEO Reed Hastings explained how important new releases were to the bottom line. If Netflix agrees to Warner Bros.’ release window delay, then other studios will likely follow suit—and that could ultimately mean lost revenues.
The one company that doesn’t seem too perturbed by Warner Bros.’ shift is Blockbuster (NYSE: BBI). Even though the new deal terms would impact Blockbuster’s own kiosk business (still in its infancy), during the company’s earnings call, CEO Jim Keyes said the 28-day delay “represents a competitive opportunity”—since the delays wouldn’t apply to rentals in stores.
Blockbuster’s overall sales slumped by 22 percent in Q2, while same-store sales dropped by nearly 18 percent year-over-year, so the company needs (and clearly will take) whatever competitive advantage it can get over its kiosk and mail-order rivals.
By Tameka Kee