Court OKs Redbox suit against Universal

DVD kiosk company gets a greenlight

The biz brawl over discount DVD rentals isn’t likely to end any time soon.

A U.S. District Court judge has allowed Redbox to pursue its lawsuit against Universal Studios Home Entertainment, less than a week after the U.S. movie-rental kiosk leader filed a similar suit against 20th Century Fox over DVD distribution terms.

Robert Kugler, a U.S. District Court judge for Delaware, granted the dismissal of two of the three counts against Universal in the 10-month-old lawsuit but denied U’s motion to dismiss the antitrust claim altogether in a decision issued late Monday. The two counts dismissed relate to copyright and tortious interference, the latter term implying an attempt to disrupt another party’s business relationships.

The decision has both sides claiming victory in the ongoing battle pitting Redbox, a division of coin-exchange machine maker Coinstar, against studios such as U, Fox and Warner Home Video, which are prohibiting the sale of new DVD releases to kiosk operators such as Redbox until at least four weeks after their street date.

The studios are worried about losing vid rental revenue from full-price distribs such as Blockbuster if titles are available immediately at Redbox’s discount kiosks. Redbox charges $1 a night for its DVD rentals. According to Adams Media Research, the average Redbox transaction in 2008 generated about $2.14 in revenue, while the average at Blockbuster was $4.09.

Redbox has been aggressive in pursuing litigation in an effort to ensure that it has access to vid releases on the same day as other retailers.

“We appreciate the court’s thoughtful review of this issue and look forward to pursuing our claim and protecting our consumers’ rights,” said Redbox prexy Mitch Lowe in a statement.

U, however, hailed the judge’s decision to narrow the case.

“Universal is pleased that the court today dismissed two of the three claims asserted by Redbox and appreciates that the claims made by Redbox are now reduced significantly,” the studio said in a statement late Monday. Last October, Redbox sued Universal, alleging that the studio, whose DVDs account for about 15% of Redbox’s rentals, violated antitrust laws with an attempt to create a “vending rental window” 45 days after the standard DVD street date.

In the Oct. 10 complaint, Redbox said U presented the retailer with a “take it or leave it” revenue-sharing agreement that would shrink consumer choice by forcing Redbox to wait until 45 days after street date to rent Universal titles. This in turn would limit the number of copies of U titles Redbox kiosks could stock and require it to destroy DVDs after their rental cycle instead of allowing resale. In December, Universal filed a motion to have the case dismissed.

Last week, Redbox filed a similar claim against Fox after the studio directed wholesalers not to sell its new release titles to any vending operator until 30 days after street date, beginning with the Oct. 27 release of “Ice Age: Dawn of the Dinosaurs.”

The suit, filed Aug. 11 in U.S. District Court in Delaware, charged the studio with, among other things, copyright misuse and antitrust violations in regard to Redbox’s relationships with wholesalers VPD and Ingram. Redbox is seeking injunctive relief and unspecified monetary damages.

That same day, Lionsgate said it signed a five-year, estimated $158 million deal to distribute its DVDs to the kiosk operator on their initial street date.

Two days later, Warner said it would sell its titles directly to the kiosk channel, led by Redbox, beginning in October and will offer Warner titles 28 days after their general market release.

Redbox has yet to file a claim against Warner Bros.

Redbox also has a distribution agreement with Sony Pictures Home Entertainment similar to the one with Lionsgate. Both studio deals, and one with Walt Disney Studios Home Entertainment, limit the sale of the studios’ titles as used product.

(Danny King is a reporter for Daily Variety sister publication Video Business. Susanne Ault, Samantha Clark, Marcy Magiera and Jennifer Netherby contributed to this report.)

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