Universal Makes New Agreement with Redbox for DVDs
Universal Pictures renewed their agreement with Redbox last week, keeping the 28-day window between when DVDs go on sale in retail outlets (like Target and Best Buy) and when they’re available for rental at Redbox. This goes against the Warner Bros. offer (which was rejected by Redbox) to extend the window to 56 days.
What makes this arrangement interesting is Universal and Warner Bros. have different ideas of what “Redbox window” is most profitable. Just to be clear: “the window” refers to the amount of time that will pass between when DVDs are sold in retail stores and when studios sell DVDs, at discounted rates, to Redbox. Studios make much more money on DVD sales than rentals, and they make more money on renting to “full price” outlets like Blockbuster versus discount outlets like Redbox or Netflix.
Warner Bros. feels the 28-day window is too short, and hurts its revenues by eroding DVD sales, pay-per-view, and premium TV subscriptions (such as HBO.) Warner Bros. thinks extending the window to 56-days will result in a “net revenue increase,” causing more customers to use these other, higher margin, outlets. Redbox rejected the 56-day window arrangement, and is now purchasing Warner Bros. new release DVDs from retail outlets rather than wait the 56-days for Warner Bros. to sell them the DVDs at reduced, wholesale prices.
Universal also thinks 56-days is too long. Even though they may realize more revenue from DVD sales and pay-per-view, they think a 56-day window puts too much time between the movie’s release date and when it’s available in Redbox. Universal feels that length of time will hurt the Redbox revenues (even though they're lower margin,) so they’re going with the 28-day window.
It’s very interesting how the two studios are on different sides of this particular coin. I guess time will tell whose model is correct. How will we know? Check the window on the next Redbox contract renewal and see who's right.
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