Coinstar Inc. (CSTR), owner of the Redbox movie-rental kiosks, ended its agreement to buy Warner Bros. titles directly from the studio, rejecting a demand to delay access to DVD and Blu-ray discs for two months.
The accord with Time Warner Inc. (TWX)’s home-video unit expiring today won’t be renewed, Coinstar said in a statement. The Bellevue, Washington-based company, which operates more than 34,000 rental kiosks, said it will get videos from third-party suppliers and make them available as soon as they go on sale.
Coinstar is the second DVD-rental service to reject Warner’s effort to make consumers wait 56 days for the latest releases, following Dish Network Corp. (DISH)’s Blockbuster. Getting DVDs sooner from other suppliers may attract more customers, making up for the higher per-unit prices Coinstar will pay, Eric Wold, a B. Riley & Co. analyst, said in an interview.
“They’ve indicated that they’ve developed a long-term replacement strategy,” said Wold, who recommends buying Coinstar shares. “They’ve either got retailers or wholesale distributors who will supply them new releases in bulk.”
The waiting period is needed to ensure a “healthy film business,” Warner Bros. said in a statement.
“We hope to continue discussions with Redbox and reach a mutually agreed-upon solution to this situation, but we fully intend to do what is best for our business, consumers and the industry,” the studio said.
Redbox waited 28 days to get videos from Warner under the previous deal. The unit still waits 28 days for DVDs from Comcast Corp.’s Universal Pictures and News Corp.’s Fox.
Blockbuster previously refused to accept the delay, a person with knowledge of the matter said on Jan. 10. Netflix Inc. (NFLX) agreed to it for its mail-order business. Those Netflix customers tend to focus more on older titles, making it easier for the company to wait longer for new films, said Wold, who is based in San Francisco.
“Redbox is all about new releases,” he said. “Waiting two months would definitely hurt their value proposition to consumers.”
The company still waits 28 days for DVDs from Comcast Corp.’s Universal Pictures and News Corp.’s 20th Century Fox. The Universal agreement expires in April of this year. The Fox accord ends in April 2013, Wold said.
Other studios, including Walt Disney Co., Viacom Inc.’s Paramount and Sony Corp., make their DVDs available for rental on the day of release.
Coinstar also said it renewed an agreement with Wal-Mart Stores Inc. (WMT) to have kiosks at more than 3,700 of the retailer’s locations.
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