20th Century Fox Gives Redbox The Smackdown

Earlier this summer, 20^th Century Fox had a very unfortunate leak of their blockbuster tentpole film, X-Men Origins: Wolverine. I was very apathetic at the time it happened and couldn’t care less that Fox thought they were losing money on the movie. All I cared about was that I got the watch the movie early, green screens and stunt wires be damned!

That’s when I found Screen Rant and thanks to its chief, Vic Holtreman, realized the error of my ways and repented, never to watch a downloaded pirated movie again (Thanks Vic!). I then found a new way to watch movies and it included a trip outside my local Walgreen’s to rent a $1 movie from Redbox. If you haven’t had a chance to rent from Redbox yet, give it a try. Those big, bright, red movie vending machines are becoming more prevalent than Starbucks and in a time of recession when people are looking to save money on family activities, $1 movies are very appealing.

I started to understand how 20^th Century felt and actually went to their side of the court because I felt they HAD been wronged. Now, I can’t help but think that Fox is playing the studio greed card with this latest news from Ben Fritz at the LA Times in the Company Town blog. The big studio execs have decided they no longer want Redbox to be able to offer their newly released movies to the viewing audience until after thirty days from the initial DVD released date; so they have instructed wholesalers to no longer sell their movies to Redbox until after the required time has elapsed.

The WHAT, here, is not as important as the WHY. Redbox works through a revenue-sharing agreement with many of the major studios, which basically means they get prime movies at a vastly discounted rate through wholesalers and then give or “share” the revenues back to the studios over the course of an agreed upon time limit, but they own all the DVDs. Take Sony for example; according to Fritz and Redbox’s press site, Redbox has reached a deal with Sony that guarantees $460 million in revenue-sharing over the next five years. That’s a lot less than Redbox would have to pay for the same movies at retail prices.

The reason I said earlier that Fox is playing the greed card is because that same deal is unappealing to them. Look at what a studio spokesperson for Fox sent in an email:

“The basis of this position is to continue to provide the consumer with broad title choice and access to Fox movies while maintaining the quality image and value perception of Fox movies. Our desire is to maintain for Fox movies a thriving network of distribution serving all types of consumer preferences, on reasonable business terms for Fox as well as our distribution partners.”

Ok, first laughable point is the part where they strive to maintain “the quality image and value perception of Fox movies.” Please don’t act like all of a sudden quality and image are your major concern. The quality of Wolverine was sub-par at best and do I even need to mention the recent quality failures of The Day the Earth Stood Still, Max Payne, Mirrors, The X Files: I Want to Believe, Meet Dave, Meet the Spartans, and Epic Movie? Good gravy I only went back to 2007 and the list doesn’t get shorter!

Second laughable point would be the last line where they want to maintain a “thriving network of distribution serving all types of consumer preferences, on reasonable business terms for Fox as well as our distribution partners.” Let me paraphrase that for you: We want more money because we think OUR stuff is worth more than other people’s stuff. Does anyone at 20^th Century Fox think for one second the consumer is boondoggled by their fancy words pretending to care how much we pay for things? If they truly cared then why not leave Redbox alone and let the lowly consumer pay $1 a night to rent a movie?

Chase Carey, President and C.O.O. of News Corp

Rollie Fingers Chase Carey, President and C.O.O. of Fox’s parent company News Corp, had this to say after their fourth-quarter earnings report:

“Having our [movies] rented at $1 in the rental window is grossly undervaluing our products.”

They care more about how much they get paid more than how much the consumer pays. No big surprise there really. They are, after all, a business trying to please Wall Street and investors with good quarterly earnings and fiscal prowess. If they came right out and said that, then I wouldn’t have such a problem with what they are doing now. Instead they shroud their actions in the guise of consumer advocacy.

Redbox isn’t just feeling the heat from Fox either; Universal is currently in court with Coinstar Inc, Redbox’s parent company, for telling wholesalers to stop selling to Redbox unless they agree to a forty-five day window for new releases. Time Warner CEO Jeff Bewkes is throwing in his two cents as well with this statement:

Time Warner CEO Jeff Bewkes

“In general, we think there may well be a role for $1 rental kiosks just like $1 movie theaters.”

Redbox isn’t being quiet on this issue and good for them for standing up to the major media conglomerates. In a press release yesterday Mitch Lowe, president of Redbox had this to say in a press release:

“We were informed of Fox’s position late today. Redbox stands behind our convenience and value that we offer consumers, and we’re pleased to make DVDs available the day they are released.”

Mitch Lowe: Courtsey Peter Wynn Thompson for the New York Times

Consider nose officially thumbed to Fox. Bravo!

Here’s my take on the whole situation. According to a Redbox press spokesperson,”Redbox employs various acquisition strategies. [We] purchase the [DVDs].” That being the case, I fail to understand how movie studios think they can dictate policy to another business based solely what they think their own product is worth? It’s worth exactly what the consumer is willing to pay for it. That’s the whole idea behind a competitive market, to lower the cost to the consumer while providing the same product or service while still turning a profit.

First, Blockbuster came out and allowed us to rent movies instead of buying them. Then Netflix changed the market by allowing us to keep them as long as we wanted for a monthly fee; they were able to offer this service by ditching the brick-and-mortar business model for a more streamlined warehouse approach. Now, Redbox has upped the ante by giving the consumer both options and value by using a vending machine approach. A competitive environment is good for business and good for the consumer.

As far as Redbox being compared to $1 theaters, it’s not even the same business model. Theaters rent the movie from the distributor paying them for the right to show the film in a large venue. The distributor decides whether they want to allow the theater to show it or not, so if they don’t want audiences seeing a film for $1 then they just don’t give the theater a copy of the film reel.

Redbox rentals (any rental for that matter) are different because the DVDs are purchased, owned and then rented, all legally. As long as the movie is not being shown outside of someone’s home, studios don’t have a say in what is done with that physical disc AFTER a legal purchase has been made (which is not the same as saying the buyer can burn infinite copies of a movie). Where do the studios get off telling Redbox what they can do with their own property? What if other businesses decided to take this approach to the sale of their products? What if Kellogg’s decided that Wal-mart wasn’t charging enough for Rice Krispies? Could they then tell wholesalers to stop selling to Wal-mart until the superstore started charging more? That would be ludicrous and would never fly.

So do you think the studios have the right to dictate how much Redbox can charge? Or do you agree that 20^th Century Fox and other studios are over-stepping their bounds?

Source: LA Times