Deal allows Instant by Verizon to offer UltraViolet-enabled titles

Coinstar’s nascent Redbox Instant by Verizon venture has inked its first studio deal, a pact with Warner Bros. Home Entertainment to offer digital movies.

The multi-year pact with Warner Bros. also eases the tension between the companies over the availability of physical discs at Redbox’s discount kiosks. Blu-ray and DVD titles with street dates between Jan. 1, 2013 and Dec. 31, 2014 will be available 28 days after their retail release dates.

That’s similar to a deal the companies had until January, when Warners tried to implement a 56-day delay. Redbox circumvented that by opting to buy the discs from retailers for day-and-date distribution.

Warners still has a 56-day delay at Netflix, but home entertainment prexy Ron Sanders said that could shrink starting with a new deal in 2013. “The product is more expensive” with shorter windows, he noted. He said Warner currently doesn’t have an agreement with Blockbuster but “is looking to change that.”

Redbox has tussled with most studios on the timing of the availability of discs. The companies said the arrangement announced Thursday “will improve the economics for both Warner Bros. and Redbox while ensuring consistent availability of Warner Bros. titles for the consumer.”

The Instant by Verizon digital service, which is set to launch later this year, can support and distribute Warner Bros. UltraViolet-enabled pics, a key part of the overall deal given Redbox’s easy interface with consumers. Redbox also announced plans to join the Digital Entertainment Content Ecosystem industry group to promote UltraViolet through marketing and promotions.

Streaming titles will be available in VOD and electronic sell-through format, and the pact covers a multi-year SVOD pact supporting feature-length content.

The deal was announced as Coinstar reported flat profit for the September quarter — $36.8 million versus $37.1 million the year before.

Bellevue, Wash.-based Coinstar, which was No. 15 on the latest Forbes list of the 100 fastest-growing companies, said revenue rose 15.5% to $538 million. Sales at the Redbox kiosk business jumped 18% on a price increase and more locations, despite fewer films in stock and customers distracted by the Summer Olympics in August. Coinstar is looking to take kiosks to another level, experimenting with selling tickets in Philadelphia for a $1 fee per ticket, and coffee in Seattle. CEO Paul Davis said he wants consumers to think of Redbox as “an entertainment destination,” not just a machine that spits out movies.

Davis was circumspect about taking on Ticketmaster, which has a much higher fee. “We think there is so much business out there that there’s room to co-exist,” he said. And the coffee kiosks will start rolling out fast in 2013 with a few thousand by year-end.

The launch of the Redbox-Verizon streaming service has been hotly-anticipated in an industry dominated thus far by Netflix. “This agreement fits perfectly with Redbox Instant by Verizon’s vision for bringing people the movies that matter, wherever and whenever they choose, using the devices and media they prefer, at home or away,” said Shawn Strickland, CEO of Redbox Instant by Verizon. Execs said on a conference call that public beta testing will start this quarter although it seems possible that a rollout to the general public may creep into next year.

Execs said Coinstar contributed $10.5 million to the service for the three months ended in September and may need to invest some more this quarter, although the amount wouldn’t be significant. Coinstar has 42,400 Redbox DVD kiosks and 20,300 coin-counting kiosks in supermarkets, drugstores and convenience stores, retailers, banks and restaurants.

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