Coinstar Inc. (CSTR), owner of the Redbox DVD-rental machines, said it hasn’t agreed to Time Warner Inc. (TWX)’s effort to double a 28-day delay in making new Warner Bros. movies available for rental.
No revised terms have been reached, Coinstar said today in an e-mailed statement, referring to reports that said a new accord with Warner Bros. established a 56-day delay for new movies. A deal for a 28-day delay on new films expires Jan. 31, according to Marci Maule, a Coinstar spokeswoman.
The standoff with Warner Bros. may signal Coinstar plans to skirt the delay by buying DVDs from third parties, said Eric Wold, a San Francisco-based analyst with B. Riley & Co. Coinstar relies more on new releases than competing services like Netflix Inc. (NFLX) because the Redbox kiosk limits the number of movies offered.
“I don’t anticipate Redbox would accept a longer delay,” Wold said in an interview. “I wouldn’t be surprised if they have an agreement with some other wholesaler or supplier that would let them buy without going into a store.”
Studios are looking for ways to protect higher-margin DVD sales, and expanding their efforts to sell digital copies of movies. Warner Bros., Comcast Corp. (COMCAST)’s Universal Pictures and News Corp. (NWSA)’s Fox, have negotiated 28-day rental delays with services like Coinstar, Netflix and Dish Network Corp. (DISH)’s Blockbuster.
Warner’s home-video president, Kevin Tsujihara, told the Financial Times in October that the studio wants to lengthen the 28-day delay. Some studios were considering rental bans as long as 60 days, people familiar with the matter told Bloomberg News that month, leading Coinstar Chief Executive Officer Paul Davis to signal resistance.
Coinstar has “workarounds” to obtain new-release DVDs from studios that seek to impose a longer delay, Davis said on an Oct. 27 conference call. The company can purchase DVDs from third parties as soon as they are released for sale by the studios.
“We’ll evaluate that and see if we want to employ that tack to protect the windows that we enjoy today,” Davis said on the call.
Buying from third parties may have little or no effect on Coinstar’s costs, analyst Wold said today. Higher costs per copy would be offset by Coinstar focusing on the most popular movies and purchasing fewer overall, he said. The company also would be able to sell used DVDs back to vendors. Resale is prohibited under the agreement with Warner.
“It could be minimal or a non-event financially,” Wold said. “They would not have to buy the not-so-appealing straight-to-DVD releases Warner forces on them.”
Netflix, which operates a movie-streaming and DVD-by-mail service that offers thousands of library titles, agreed to the Warner Bros.’ longer delay, Variety reported yesterday. The website AllThingsD reported earlier that a new Warner Bros. pact with Redbox, Netflix and Blockbuster will double the current delay to 56 days.
Jim Noonan, a Warner Bros. spokesman, said the company had no comment. Steve Swasey, a spokesman for Los Gatos, California- based Netflix, declined to comment, as did Aaron Johnson, a spokesman for Englewood, Colorado-based Dish.
Coinstar, which operated about 34,400 DVD rental kiosks as of Dec. 1, fell (CSTR) 5.5 percent to $40.98 at the close in New York. Shares of the Bellevue, Washington-based company declined 19 percent last year. New York-based Time Warner fell 0.7 percent to $36.55 after gaining 12 percent in 2011.
Coinstar has deals with Sony Pictures, Lions Gate Entertainment Corp. (LGF) and Paramount Pictures studio to obtain DVDs for rental on the same day they become available for sale, Davis said in October, calling that the best arrangement for consumers.
“Some studios want a window and we try to work with them,” Davis said in an Oct. 27 interview. “There’s a point to where it might not make sense.”
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