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Redbox-Sony Pictures deal underscores value of bargain DVD rentals?

It is the rental-kiosk company's first publicly disclosed deal with a major studio. Sony stands to collect approximately $460 million over the term of the five-year agreement.

July 23, 2009|Dawn C. Chmielewski

Sony Pictures Home Entertainment's new licensing deal with Redbox Automated Retail -- operator of those bright-red $1 DVD rental kiosks in grocery and convenience stores -- adds up to some serious coin.

Sony stands to collect about $460 million over the term of the five-year agreement, which extends through September 2014, according to regulatory filings. The deal is the first publicly disclosed arrangement with a major studio, underscoring how valuable the movie-rental vending machines have become for Hollywood.

"Our consumers have always been the best barometer of where our business needs to go, and clearly Redbox has become an important distribution option," said David Bishop, president of Sony Pictures Home Entertainment.

The studios have struggled over how to respond to Redbox, which rents out movies at prices that undercut those charged by traditional video-rental stores such as Blockbuster. Some home entertainment executives worry that the kiosks, now found in more than 17,000 places nationwide, are undercutting DVD sales.

Sales of packaged media -- DVDs and Blu-ray discs -- were off 13.5% for the first half of the year. The drop in DVD sales was only partially offset by the growth in purchases of Blu-ray discs and digital distribution. Rental spending rose 8% in the same period, according to the Digital Entertainment Group, a trade organization.

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dawn.chmielewski@ latimes.com

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