Hollywood's War With Redbox Expanding To Netflix As Well?

from the shooting-the-foot dept

Fri, Aug 14th 2009 10:53am — Mike Masnick

Hollywood really never learns, does it? Following 20th Century Fox's decision to try to stop Redbox from getting movies to rent via its kiosks (to which Redbox has responded by suing Fox), Warner Bros. has joined in as well, but isn't just trying to stop Redbox, but Netflix, too. It wants to force both companies not to rent DVDs until a month after the DVDs are actually released... unless the companies agree to share revenue from the rentals.

There's basically no legal basis for this move, which would only serve to piss off consumers (yet again). These companies are free to buy the DVDs and rent them out, but the studios want a cut of every rental. It's sort of like video game makes demanding a cut of every used game sale, or an artist demanding a cut every time a piece of his artwork is sold. It's entitlement society all over again. Nothing should happen without the original company getting paid. What they don't realize is how this limits them. Netflix and Redbox become less interested in promoting Warner Bros.' movies, because they're now a lot more expensive to those companies. Instead, Hollywood is handing incentives over to these companies to promote other films that don't demand their tithe.

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Filed Under: dvds, redbox, rentals
Companies: 20th century fox, netflix, redbox, warner bros.

62 Comments

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Chuck Norris' Enemy (deceased) (profile), 14 Aug 2009 @ 11:13am

Does everyone pay a cut?
I wonder...does Blockbuster or Hollywood Video or the local movie rental business have to pay a cut of rental sales to the studios?
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- Dark Helmet (profile), 14 Aug 2009 @ 11:15am
  
  Re: Does everyone pay a cut?
  Blockbuster and Hollywood Video are still around? You have to be shitting me...
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  - Anonymous Coward, 14 Aug 2009 @ 11:28am
    
    Re: Re: Does everyone pay a cut?
    Blockbuster and Hollywood Video are still around? You have to be shitting me...
    
    Only because Redbox isn't everywhere yet.
    
    Just give it some time.
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    - DJ (profile), 14 Aug 2009 @ 11:58am
      
      Re: Re: Re: Does everyone pay a cut?
      I've seriously never heard of Redbox until now. Netflix, of course, but not Redbox. But then, I'm a good little cow. I go to the theater, and if I like the movie I'll buy it when it comes out on dvd. Moooooo.
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      - Alan Gerow (profile), 14 Aug 2009 @ 12:56pm
        
        Re: Re: Re: Re: Does everyone pay a cut?
        RedBox is most commonly found at McDonald's restaurants. At least around Denver. There's another company that provides an identical service that has kiosks in a lot of grocery stores around here, too.
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      - Hephaestus (profile), 14 Aug 2009 @ 12:57pm
        
        Re: Re: Re: Re: Does everyone pay a cut?
        "I've seriously never heard of Redbox until now."
        
        You cant miss them .... go to a grocery store .... look for the big RedBox with DVD covers on the front...
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  - Chuck Norris' Enemy (deceased) (profile), 14 Aug 2009 @ 11:41am
    
    Re: Re: Does everyone pay a cut?
    Actually where I live there is a Hollywood Video and a Family Video and at least four RedBox kiosks. No Blockbuster. I haven't ventured to Hollywood Video. But Family Video is okay. They lend out old childrens movies for free (no purchase necessary) and all their movies are rented for $1 a piece with the length of rental depending on how old the movie is. That is pretty good competition with the two RedBox kiosks that sit within one block either direction. Especially with selection. Plus the free kids movies compete with the public library.
    
    I just did a quick google and it looks like Blockbuster does pay royalties but they are not required to under current copyright law.
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    - Dark Helmet (profile), 14 Aug 2009 @ 11:48am
      
      Re: Re: Re: Does everyone pay a cut?
      "I just did a quick google and it looks like Blockbuster does pay royalties but they are not required to under current copyright law."
      
      Hold up....Blockbuster is paying royalties that they aren't required to? What the hell? Aren't they a publically traded company? Where are the investors on this?
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      - DJ (profile), 14 Aug 2009 @ 11:59am
        
        Re: Re: Re: Re: Does everyone pay a cut?
        Mooing with the rest of the herd.
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        Anonymous Coward, 14 Aug 2009 @ 12:06pm
        
        Re: Re: Re: Re: Re: Does everyone pay a cut?
        They're sheep. They bleat, not moo. :D
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        Alan Gerow (profile), 14 Aug 2009 @ 12:07pm
        
        Re: Re: Re: Re: Re: Re: Does everyone pay a cut?
        Sheeple make more of a "blaaaah" sound.
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      - Alan Gerow (profile), 14 Aug 2009 @ 12:06pm
        
        Re: Re: Re: Re: Does everyone pay a cut?
        "Where are the investors on this?"
        
        Happy their company isn't the target of a lawsuit.
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        DJ (profile), 14 Aug 2009 @ 12:11pm
        
        Re: Re: Re: Re: Re: Does everyone pay a cut?
        Sydney J. Harris said it best. "A cynic is not merely one who reads bitter lessons from the past; he is the one who is prematurely disappointed in the future."
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        Alan Gerow (profile), 14 Aug 2009 @ 12:55pm
        
        Re: Re: Re: Re: Re: Re: Does everyone pay a cut?
        Are you saying I'm a cynic from this comment?
        
        I'm cynical when it comes to government. But optimistic when it comes to technology & the free market.
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        Joel, 15 Aug 2009 @ 12:05am
        
        Re: Re: Re: Re: Re: Does everyone pay a cut?
        Actually they're hoping that the loan they renegotiated at the beginning of the year for $250 million keeps them in business until 2010
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      - hegemon13, 17 Aug 2009 @ 6:47am
        
        Re: Re: Re: Re: Does everyone pay a cut?
        Blockbuster has specific revenue-sharing arrangements with the studios. They buy their movies at a highly reduced rate, have studio buy-backs, get exclusives, etc, in exchange for revenue-sharing. They are required to pay royalties because of their specific contracts, but not because of copyright law.
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- Pangolin (profile), 14 Aug 2009 @ 11:47am
  
  Re: Does everyone pay a cut?
  As I understand it - BlockBuster pays a premium price. A $9.95 DVD consumer wise would cost them $60.00 in order to rent it out.
  
  Perhaps netflix isn't paying the premium. It's bogus anyway.
  
  I think the idea is that rentals are cutting into sales. It's so wrong.
  
  I would spend the "pennies" on the rental for something I have not seen - but not DOLLARS - it's a risk vs Reward proposition. Why risk my dollars? If I truly like it after renting then I'll buy it.
  
  If not then in reality I would have had a $20.00 rental if I purchased it.
  
  Anyway - it's a dumb move.
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  - Ben Robinson, 14 Aug 2009 @ 12:15pm
    
    Re: Re: Does everyone pay a cut?
    Pangolin makes the key point here, the studios are already getting a cut of the rentals in that purchasing a DVD licensed for rental is much much more expensive than buying a consumer DVD, which if you read the small print in the copyright notice, expressly prohibits renting it out. What they are asking for here is to be paid twice. It just seems that media companies are hell bent on making sure that no one other than them can make a profit from their content. What's next? Retailers have to buy the DVDs and also pay a royalty? As a freelance software developer i really wish i could get away with this kind of thing. "Why yes Mr Client, i know i charged you £20,000 to develop this software, but if you actually want to use it you will have to pay me 5% of your annual revenue." I would be very very poor if i ran my business like that.
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    - Kevin Stapp (profile), 14 Aug 2009 @ 12:44pm
      
      Re: Re: Re: Does everyone pay a cut?
      "if you read the small print in the copyright notice, expressly prohibits renting it out"
      
      And yet another example of corporations abusing copyright to reserve rights they do not have. You buy the DVD, it is yours to watch, give away, sell or RENT. It is your property to do with as you please. What copyright prohibits is playing a DVD in a public performance.
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    - William Windrem, 17 Aug 2009 @ 2:37pm
      
      Re: Re: Re: Does everyone pay a cut?
      There is no "royalty" paid on rental DVD's. There is no double dipping from the studio's on this point. This, to me, looks like the studio's giving those that have supported them over the years(video stores) a chance to thrive and survive against a system that employs almost no staff. It levels the playing field so those that actually run a brick and mortar video store to compete against a box that requires no staff, little floor space and has no personality. Hope that Redbox can recommend something to watch when all those copies Road Trip Beer Pong are all out.
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  - hegemon13, 17 Aug 2009 @ 6:51am
    
    Re: Re: Does everyone pay a cut?
    Wrong. That's they way it was when they rented VHS, but that was because they were able to buy the VHS tapes well before the studio released them to the general public. Now, Blockbuster pays a substantially reduced rate for DVDs, but they have revenue-sharing arrangements with the studios, so they pay a royalty from each rental.
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- mjb5406 (profile), 14 Aug 2009 @ 12:22pm
  
  Re: Does everyone pay a cut?
  Yes... when the Universal Studios Home Entertainment vs. Redbox issue erupted last year, it was disclosed that the studios do, in fact, have a so-called "revenue-sharing" agreement with Blockbuster. So now you can ome upmwith your own conspiracy theory... Blockbuster is colluding with the studios to stifle the competition, to avoid having its brick & mortar stores close. Nobody that I know of has yet pointed to Blockbuster as a reason for this happening; maybe their agreement with the studios has a clause that the studios will prevent any other entity from renting DVDs to the detriment of Blockbuster.
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  - Robert A. Rosenberg, 15 Aug 2009 @ 11:25am
    
    Re: Re: Does everyone pay a cut?
    maybe their agreement with the studios has a clause that the studios will prevent any other entity from renting DVDs to the detriment of Blockbuster.
    
    I have been in my local Brick and Mortar Blockbuster and they apparently DO have such a clause for some movie releases. There are some of these that are marked "Blockbuster Exclusive" by which I assume that they are either not available from other rental outlets or maybe are prereleases of DVDs that will later be released to the consumer market (ie: The official release date of the DVD is December 2009 but you can rent it from Blockbuster now starting in October 2009).
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    - William Windrem, 17 Aug 2009 @ 2:44pm
      
      Re: Re: Re: Does everyone pay a cut?
      LOL, wrong. If you mean the "Rental Exclusive" item on rentals found not only at Blockbuster, but at EVERY video store you are mistaken. The only difference between a regular DVD and a rental exclusive DVD is that the Rental Exclusive has no "Bonus Features" it only has Trailers additional to the title. There is no super early secret release date just less content to bring down the costs. Studios are working with retail and rental establishments to bring overall costs down to make it more accesible so people won't pirate. But of course, they're all out to get you so just ignore anything I've said.
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- Anonymous Coward, 18 Sep 2009 @ 9:35am
  
  Re: Does everyone pay a cut?
  most rental places use services that rent to own the dvd's, this means that after the first 140 views or so the profit is cut down the middle, to the rental place, and to the rent able DVD provider, these providers usually pay the movie company to sell the dvd's that they get, so the prophet all trickles down.
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- to big for your britches, 2 Nov 2009 @ 1:06pm
  
  Re: Does everyone pay a cut?
  yes the big movie rental chains pay a rate to carry and rent these out showtime pays 1.25 per movie
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Steve, 14 Aug 2009 @ 11:15am

Just another attempt to put the genie back in the bottle. Hopefully the studios won't succeed, though. It seems a bit ironic though, that this is happening when video rental places are closing down left and right.

Actually, I don't mind going to Hollywood Video now and then (generally when I wanna watch something *right now*), but their selection is so crappy, it's not worth the hassle.

If the pay-per-view option gave me the same viewing window as the video store (5 days or so versus 24-hours), I probably wouldn't have as much an issue ponying up $5 for it.

I'm not really sure where I was going with this ... :)
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- Shawn (profile), 14 Aug 2009 @ 11:22am
  
  Re:
  I am in no way trying to be critical or a wise ass I m just curious- How often does the situation arise that you click 'Purchase' on your remote and something keeps you from watching 90 mins of entertainment in the proceeding 24 hours?
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  - Anonymous Coward, 14 Aug 2009 @ 11:34am
    
    Re: Re:
    Actually pretty often. Since they started the 3-day thing Pay-Per-View on DVR, I've bought 3 movies and wasn't able to finish any of them.
    
    If you want to make a customer feel like a chump, that's how. As a result, I don't buy PPV anymore, and for Blockbuster, well, it's been close to 7 years since I stepped foot into one of those.
    
    If you don't want people to buy your product, be sure to make it tough for customers to do business with you.
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    - Kevin Stapp (profile), 14 Aug 2009 @ 12:46pm
      
      Re: Re: Re:
      The chances of finishing a movie in one sitting is inversely proportional to the number of children you have
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  - cgibinladen (profile), 14 Aug 2009 @ 1:19pm
    
    Re: Re:
    You obviously don't have kids.
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Freedom, 14 Aug 2009 @ 11:36am

Misdirected at best...
Studios are missing the point.

People no longer think of media as something they must own. The typical person today wants access but doesn't particular care about ownership. The thought of paying $20 to $40 for a new movie that you'll watch probably once is nuts. The inefficiencies of the old system were great in that it pushed people into an ownership mindset and the studios made a lot of money, but that just isn't the case today. Instead of fitting against the tide, they really do need to learn that the tide has changed and learn how to surf the new waves...

Competition has increased and we have tons of media options available to us now. The good news is that the client base should be larger than ever so the right business/hit should actually make more money if the business plan is solid.

In the end, making your product more expensive with increased competition in the market place and making it less useful aren't great ways to increase your market share and most likely your profits.

Freedom
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- DJ (profile), 14 Aug 2009 @ 12:09pm
  
  Re: Misdirected at best...
  "The typical person today wants access but doesn't particular care about ownership. The thought of paying $20 to $40 for a new movie that you'll watch probably once is nuts."
  
  In general, that's true, but I even buy books that I only read once. Movies, I'll watch several times. It may be years between those times, but I'll watch 'em. Therefore, kind of despite my earlier post, I won't buy a movie unless it's something I think I'll watch more than once.
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Anonymous Coward, 14 Aug 2009 @ 11:47am

Isn't this the kind of strongarm tactics the railroads used? Pissing off the biggest purveyor of your wares is not the way to go.
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Free Capitalist, 14 Aug 2009 @ 11:50am

What's a "Warner Bros."? Are they in the movies?

Netflix makes the best movies ever. They'll totally stomp these newcomers.
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- DJ (profile), 14 Aug 2009 @ 12:12pm
  
  Re:
  LMAO
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jsl4980 (profile), 14 Aug 2009 @ 11:53am

ugh...
They need to make sure its easier to obtain their goods legally. The customers they're pissing off aren't interested in buying their products. They should be happy they were getting anything from Netflix or Redbox. This just makes the less-than-legal approaches much more appealing.
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Anonymous Coward, 14 Aug 2009 @ 11:55am

ENOUGH.
If Netflix is forced to raise it's rates because of this I will not stream or rent Warner movies. Fuck them for making my life more difficult. They are going to push me back in to dling and giving them nothing out of spite. You assholes ruined Hulu. If you ruin something I pay for I'm going to start taking my response to your thievery up a notch.
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- Anonymous Coward, 14 Aug 2009 @ 12:07pm
  
  Re: ENOUGH.
  Remember, it's not theft. It is copyright infringement.
  
  Copyright is civil. Theft is criminal.
  
  Copyright means you have a copy but the owner has not lost the property. Theft means you took possession away from the owner.
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  - DJ (profile), 14 Aug 2009 @ 12:15pm
    
    Re: Re: ENOUGH.
    Now you're arguing minutia. Concept is the same.
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  - Anonymous Coward, 14 Aug 2009 @ 12:19pm
    
    Re: Re: ENOUGH.
    He said their thievery, not his.
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- StandUP & SAY NO MORE BS, 1 Sep 2010 @ 11:56pm
  
  Re: ENOUGH.
  Ya know once the theatre prices went SKY HIGH.. It got cut from the budget.... The problem with Hollywood & most "Modern Business Practices" is Greed and quagmire. I find it ironic they look for the cheapest method to do or make a product.. only to inflate the price to be budget busters.... then they cry foul because WE the people look for cheaper alternatives to whatever. But in just about everything that is wrong with our country/ Hollywood, its our fault for not standing up with that Used to be Infamous American ONE VOICE, Stop buying their products, seeing their movies, voting out crooked lying lobby-pocketed Politicians and tell Gov& Big Business to get their acts straight.. Stop buying the 'brewha' that the economy is a mysterious complicated affair. Enough is Enuf!
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Scote, 14 Aug 2009 @ 12:19pm

"Re: Does everyone pay a cut?
by Pangolin
As I understand it - BlockBuster pays a premium price. A $9.95 DVD consumer wise would cost them $60.00 in order to rent it out."

No, AFIK, it is the opposite. Blockbuster has revenue sharing agreements with the studios that allow Blockbuster to get DVDs at a below wholesale unit cost by giving the studios a cut of the rental income per rental. That is how Blockbuster was able to offer "guaranteed" availability of certain new rentals, because they paid so little for each copy.

This whole thing is the studios rehashing issues that were worked out in the 80's.

The VCR made it possible for studio to sell movies direct to the public and for stores to buy videos and rent them to the public. The studios ranted and raved and said it was illegal for stores to rent movies without permission from the studio and paying them royalties for every rental. Copyright law said otherwise. The Doctrine of First sale says a purchaser may do what they want with the physical copy of a copyrighted work, including re-sell it (used record stores and book stores) and loan it out (libraries and video rental stores). So, the studios invented sell through pricing. When first released, VHS video titles were sold for high cost of $80-100, which was to soak the video rental stores. Then in a few months popular titles would have their prices reduced to direct to consumer "sell through" prices of $20-30. Eventually the direct to consumer market became so strong they dropped the initial "soak the video rental store" pricing and priced all videos for consumers.

Now, the studios are having the same issue they had with VHS, they want more money from the video rentals, except they don't want to have two release windows with different pricing, so they are using, IMO, illegal means to try and ban Red Box from being able to legally buy DVDs from their contractual supplier. To me, that is clearly illegal tortious interference.
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Lonzo5, 14 Aug 2009 @ 12:26pm

Mike,

It seems, what with all this boundless greed, miserably failed business models attached to corporate giants and misguided moneygrabs flying around, there's no chance you guys will ever run out of material for this site. I applaud all that you do. You've very rarely made any point with which I disagree, and every time I research the topics you bring up I find myself agreeing with you even more. I thank all of you at Techdirt for educating me in just how wrong things are with business, law, you name it. Thanks.
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Jason, 14 Aug 2009 @ 12:28pm

This is crazy
I think the amount that is paid for Netflix or Redbox to purchase the movie is enought. They should not be allowed to take a part of the rental rates for each movie becase than that would create a monopoly that would just hurt the consumers that want to use the service. I don't know about anyone else but if I rent a movie from Netflix or Redbox then I like it I will then purchase it. These companies should not be alowed to regulate there items like this. I feel that is just like what we are seeing with the Microsoft issues. Other companies complain that they are not getting the downloads or the purchase that they want well if you would make a good product and price it better than more would come and buy it.
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zilch, 14 Aug 2009 @ 12:31pm

Rentals from the 80s
Back in the 80s several studios did not release movies to the general public during initial video release. Anyone remember that? Instead they release the movies at over 100 dollars a pop making it only really an option for video rental stores. There was a second video release later for general public to purchase tapes at a more reasonable price.
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- Anonymous Coward, 14 Aug 2009 @ 5:41pm
  
  Re: Rentals from the 80s
  I remember the 100 price tag for tapes wholesale being around 70
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Hephaestus (profile), 14 Aug 2009 @ 12:53pm

Look how good that worked out for them .....

Repeating the mistakes of the past seems to be a theme among the media outlets.

Lets start with EMI....
Napster ??
Grooveshark
Techmeme
Sideload
MP3.com
XM Satellite Radio

Most of the lawsuits start the same way "we want to be your friend and business partner tell us about yourselves and your company" basically EMI's round about, no court needed, version of the discovery process. It then starts a lawsuit in order to use the lawsuit to pressure the best possible deal from the company. In every case this has ended in disaster, the company losing the ability to grow, the company failing, and here is the kicker .... EMI losing out on a potential revenue stream. Could explain the £757 million Loss for the year 2008 see ....EMI Annual Review 2008

Now enter 20th Century Fox and Warner doing the same thing, skipping the we want to be your friend stage and going directly to the lawsuit phase. I agree with mike this lawsuit doesnt have a leg to stand on. This suit is like General Motors telling the car rental companies they want a share of the profits everytime car rental occurs.

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diabolic (profile), 14 Aug 2009 @ 12:59pm

More reason NOT to buy or rent. Can't remember the last time I saw a release from a major studio that was worth buying.
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Jordan (profile), 14 Aug 2009 @ 1:15pm

Enforcement
And how do they plan to enforce this. Tell their distributors not to sell to Netflix?
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Chris in Utah, 14 Aug 2009 @ 1:16pm

Tithe to the government, tithe to corporatism. Then prohibit the independent screen.

I do remember the 1980's and what it spawned the business model that works; Multi-seat Operating system sales. Yay!!
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Anonymous Coward, 14 Aug 2009 @ 1:34pm

If I have to start waiting over a month to see new releases, then I will gladly never rent a single Fox or Warner Bros. movie from Netflix and simply download every single movie I want to watch. Fuck you Fox and Warner.
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joe (profile), 15 Aug 2009 @ 3:51pm

What, Me Worry?
I don't see the problem here.

Historically, there were "First Run" movie theatres, and other screens got the films two weeks later.

I'm a RedBox and Netflix user. It makes no difference to me if I have to wait an extra month to see a given DVD. If someone else wants to pay more to buy the DVD or watch it on a premium on-demand basis, what's wrong with that?
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HomerJ (profile), 15 Aug 2009 @ 9:51pm

If I recall Blockbuster and Hollywood Video have deals with the studio to share revenue on titles as a way to get more copies of the hot new releases. They get a better price on the stock and share a portion of the revenue. I believe the studios also get a cut of the revenue from the previously viewed sale of the stock as well. They can also control the price the previously viewed movies are sold at. They want them as high as possible to not diminish the value of the DVD.
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johnney (profile), 16 Aug 2009 @ 12:20pm

Another fun thing to do is bribing children with candy.
Only problem is, it only works good at halloween. Kind of a good description of Hollywood's own movie plot. Boring with too many sequels.
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nelsoncruz (profile), 17 Aug 2009 @ 11:20am

No rental right?
I find it funny that the US, having quite probably the most restrictive copyright laws in the world, doesn't have an exclusive renting right (not cancelled under first sale). Redbox can by DVDs through distributors or retail, and rent them out as they please! Here in Europe that would be illegal. And apparently it's part of the TRIPS treaty as well. Which means the US is in breach of TRIPS. :)
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Fernando, 17 Aug 2009 @ 2:04pm

Of course there's a "legal basis" for a studio to pick and choose its wholesale customers. Otherwise the whole system of exclusive distributorships, for example, could not exist. Sheesh.
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AllRise, 21 Aug 2009 @ 3:56am

Join in on the action
Redbox VS. Warner Brothers - Now at AllRise Community Court http://bit.ly/421q8d
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david, 25 Aug 2009 @ 9:09pm

Videomatic
Have any of you heard of Videomatic? Checkout videodepot247.com and videomatic.com. This is the future of video stores, a full inventory in a fully automated setting in anywhere from 600 to 1500 sq feet. Let me know what you guys think. Thanks.
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Anonymous Coward, 26 Apr 2010 @ 5:16am

The actual reason this has happened is because of the local video store. RedBox, Netflix, and other rental places like this ar taking away their buisness, which in turn is shutting them down and causing less sales for movie production companies. I'm sorry that "Fat" America is to lazy to go 2 blocks to their local video store and actualy rent a video. Help support your communities people!
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Gluttenwood, 2 Sep 2010 @ 12:22am

Does everyone pay a cut?
Well I really gotta throw this in there.. but remove the status we give to Hollywood/actors/actresses etc. hollywood makes a product and sells it once.. Now.. You goto your fav ___Mart.. Buy a computer a desk and a chair... the messed up thing [in a consumer sense] Ya don't pay a fee to the chair maker everytime You or SOMEONE else sits in your Chair, or You or Your Guests use the Desk,, and we certianly as ^*^* wouldn't stand for HP telling Us that there was a fee charged everytime You let a friend turn on your PC to do his/her Business Letters...? frankly the real bitch is that Hollywood has gotten just to free in these high priced actors, that want 2 mansions, 20 cars, a house in Switzerland, France and Italy. Hollywood needs to shed some baggage tell these Silver Screen Queens to make up the rest of their income by gettin dirty and doing the old skool.. Get paid by endorsing Products, TV Shows & Commercials!
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Bob Saget, 17 Oct 2010 @ 6:21pm

RE: Bob Saget
Hi, it's Bob Saget here. I just wanted to throw in my two cents on this matter. I for one think that this whole thing is absolutely preposterous! I mean when is Redbox and Netflix gonna start having porn?
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