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Disney Sues to Block Redbox’s Digital Movie Sales

Disney has filed a lawsuit seeking to stop Redbox from selling digital codes for accessing Disney movies to download or stream.

In October, Redbox launched a service offering “digital codes” (redbox.com/digital-movie-codes) for customers to be able to purchase Disney movies at from its nationwide network of kiosks. The kiosks dispense a printed code with information on how to stream or download them to various devices from Disney’s services or affiliated sites.

In response, a Redbox spokeswoman said, “While we don’t comment on pending litigation, we feel very confident in our pro-consumer position.” The news was first reported by the Wall Street Journal.

Disney said in a statement, “Redbox is selling our digital movie codes in blatant disregard of clear prohibitions against doing so. Their actions violate our contracts and copyrights, and we have filed this action to stop Redbox’s unauthorized conduct.”

Disney’s lawsuit, filed Thursday in a federal district court in Los Angeles, alleges copyright infringement and seeks an injunction on Redbox’s sale of its movies. Disney is asking for damages of up to $150,000 per title sold by Redbox for “willful infringement” (or monetary damages to be determined at trial), and also wants Redbox to fork over the money it has made from sales of its movies.

Disney titles that Redbox offers for sale through the digital codes service include “Cars 3” for $14.99; “Guardians of the Galaxy Vol. 2” for $7.99; “Pirates of the Caribbean: Dead Men Tell No Tales” for $7.99; and “Rogue One: A Star Wars Story” for $4.99.

Redbox hasn’t had a direct distribution deal with Disney since 2012. For DVD titles from the Mouse House that Redbox offers for rent, the company purchases discs on the open market.

According to Disney’s lawsuit, Redbox purchases Disney DVD and Blu-ray Disc “Combo Packs,” which include a code for accessing digital copies of the movies. Redbox then separates the physical discs (which it rents) from the codes, and re-packages the code inserts into Redbox cases for resale, the complaint states. Disney noted that the packaging on the Combo Packs include the notice that “Codes are not for sale or transfer.”

Redbox’s move to sell access to Disney movies may have been intended to apply pressure on Disney to reach a direct deal for DVD distribution. Disney operates its own digital movie service, Movies Anywhere, which in addition to titles from Disney (including Pixar, Marvel Studios and Lucasfilm) offers selections from Sony Pictures Entertainment, 20th Century Fox Film, Universal Pictures and Warner Bros. Entertainment.

Earlier this year, Redbox inked new deals with Sony Pictures Home Entertainment and Lionsgate for day-and-date rentals (available same day as retail Blu-ray and DVD release) and with Warner Bros. and 20th Century Fox for rentals seven days after home-video release.

Redbox, based in Oakbrook Terrace, Ill., is owned by private-equity firm Apollo Global Management, which bought former Redbox parent company Outerwall last year.

Redbox says it averages more than 1 million rentals per day, charging $1.50 per day for DVD rentals and $2 per day for Blu-ray rentals; the kiosks also vend video-game discs. The company expects to have installed more than 1,500 net new rental kiosks in 2017, to have about 41,500 kiosks across the U.S., with more planned in 2018.

Disney filed suit against Redbox in U.S. District Court for the Central District of California, Western Division, in Los Angeles. The case number is 2:17-cv-08655.

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