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Redbox blames studios, stores for DVD shortage

A lawsuit says studios are leaning on retailers to curtail bulk sales of DVDs to the rental kiosk firm.

December 04, 2009|By Ben Fritz

Redbox is having trouble stocking DVDs from the three studios it is battling in court -- 20th Century Fox, Universal and Warner Bros. -- and is blaming retailers for the problem.

However, two of the three major chains that the fast-growing $1-per-night DVD kiosk company named, Best Buy Co. and Wal-Mart Stores Inc., denied the charge.

Redbox made the allegation in amended versions of its lawsuits filed this week against Fox and Warner. The Fox complaint accuses the studio of "unfair competition" in forcing retailers, in an effort aimed at Redbox, to restrict the number of DVDs that any individual can purchase. Though Redbox did not name retailers in the amended suit, it identified Best Buy, Wal-Mart and Target in a Securities and Exchange Commission filing Thursday.

A Redbox spokesman said it was unclear exactly how the studios were influencing the retailers. "We do know that certain Wal-Mart, Best Buy and Target stores have informed field representatives of Redbox that such stores were limiting sales of new-release DVDs to as few as three copies," he said.

The company has had employees buy Fox, Warner and Universal movies from retail stores ever since those studios over the last year have instructed their distributors not to provide DVDs to discount kiosk renters until about one month after they go on sale. Redbox responded by suing.

All three studios are concerned that $1-per-night new releases hurt more-profitable DVD sales and higher-priced rentals. Redbox has argued that it is adding revenue to the industry and that the studios have no right to treat it differently from other rental outlets.

However, it has had trouble keeping its kiosks full while the cases are pending.

A check of Redbox's website Thursday indicated that new releases from the three studios with which it is feuding, such as Fox's "Ice Age: Dawn of the Dinosaurs," Universal's "Funny People" and Warner Bros.' "Terminator: Salvation," are available in very few or no kiosks in Los Angeles. Meanwhile, popular new movies from studios with which it has deals -- such as Paramount's "Star Trek," Disney's "Up" and Sony's "Angels & Demons" -- are in stock at nearly every Redbox location in the city.

The kiosk company says studio pressure on retailers is one cause of that shortage. "Defendant's intentional interference is evidenced by instances in which retailers have refused to sell DVDs and limited the number of DVDs that they would sell to Redbox personnel," its amended complaint against Fox alleges.

A spokeswoman for Wal-Mart said there had been no recent change in its policy of giving store managers the option to limit purchases of certain products to preserve their availability for consumers.

A spokeswoman for Best Buy said the chain adopted a policy this year limiting the number of copies of a DVD movie anyone can purchase to five and has not altered it in response to studio complaints about Redbox.

A Target spokeswoman did not respond to a request for comment.

One person close to a major studio fighting with Redbox did say earlier this year that he hoped retailer restrictions hurt the kiosk company, but didn't indicate that any major chains were cooperating to do so.

A Warner Bros. spokesman called Redbox's amended complaint "improper and baseless." A Fox spokesman described it as "legally and factually insufficient."

ben.fritz@latimes.com

Times staff writer Dawn C. Chmielewski contributed to this report.

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