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Redbox says alternate DVD artwork is legal

By Danny King -- Video Business,12/29/2009

DEC. 29 | PHYSICAL: Redbox refuted an analyst’s assertion last week that its use of alternate artwork on DVDs from studios such as Warner Home Video and Universal Studios Home Entertainment during the first few weeks of their titles’ release violates copyright laws. Meanwhile, the Coinstar unit appears to be picking its spots when it comes to so-called workaround agreements to get street-date titles from studios with delayed release windows.

The Coinstar unit has to use different artwork than what retailers such as Blockbuster and Best Buy get from Warner, Universal and 20th Century Fox Home Entertainment because those studios won’t distribute directly to movie-rental kiosks until at least four weeks after street date. Because the artwork Redbox uses is designed to look similar to that of the DVDs going to non-kiosk retailers, the company may be violating copyright laws, Pali Research analyst Richard Greenfield wrote in a note to clients last week.

Because Redbox creates the artwork, though, it is legal, according to a company spokeswoman.

“Artwork created by Redbox is either original or is used with permission,” said Redbox spokeswoman Laura Dihel said. Dihel didn’t elaborate on how the alternate artwork is created.

The largest movie-rental kiosk operator, which has lawsuits against Universal, Warner and Fox, is using so-called workaround agreements with retailers such as Walmart and Costco to get new titles from the three studios, which account for about 40% of U.S. DVDs.

Although the agreements to get the DVDs are legal under the first sale doctrine, using either the studio-provided artwork or alternate but similar artwork may not be, Greenfield wrote in his Dec. 22 note.

“Redbox is already disadvantaged by not having access to the actual cover art, however, their replacement art is clearly designed to be similar to the original, without showing actual actor/actress faces,” Greenfield wrote. “We simply wonder whether they are allowed to go as far as they are going with replacement cover art.”

Meanwhile, Redbox appears to be factoring in box-office success when it comes to stocking titles from the three studios during the week of their street date, Merriman Curhan Ford analyst Eric Wold wrote yesterday.

The company didn’t stock any copies of Fox-distributed (500) Days of Summer and All About Steve, which were released on DVD Dec. 22 and had a combined $66 million in U.S. box-office receipts earlier this year, according to Wold.

By comparison, week-earlier new titles including Warner’s The Hangover and Universal’s Inglourious Basterds were both stocked in more than 85% of Redbox kiosks early in the week, though most copies were checked out by the end of the week, Wold wrote in a Dec. 21 note to clients. Those titles combined grossed almost $400 million in U.S. box-office receipts.

The lack of Redbox DVD copies of Days and Steve “was probably due to the movies’ relatively low box-office revenue,” Wold wrote. 

Redbox declined to comment specifically about the Merriman report though did say it factors in things like box-office performance and estimated return on investment when stocking new DVD titles.

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Submitted by: Sypher (moviephase@gmail.com)
12/31/2009 12:28:43 PM PT

Home Media Magazine is great source for info, but like all companies they do not care for the locals comments to their articles. I have been writing to their columnist and to various analysts for some time without even a courtesy of a return comment. Studios have the same attitude; they do not see us, until we are large enough to make an impact (aka. Redbox). With Blockbuster and Hollywood’s closing down, Digital Media being bootlegged, and VOD in potential extinction due to Netflix instant streaming (people are willing to wait for movies since you can watch 17 thousand movies for $8.99 without a single commercial). My stores went from making over $100k-$125k a month to about $36k-$40k. I have heard through industry sources that Netflix gets new release disk at about $5-$7 a title (no artwork/sleeve), which means they can provide $16.99 for 3 movies out at a time, and still make a provide after paying for the postage, fixed & variable costs, administrative cost, in addition to over $1M in salary to it VPs.

Studios are facing double digit declines, and Netflix stocks are up 90% YoY. Netflix might have the studio's fooled, and someday when they realize more people are switching back to basic cable service (from $60 to $15 dollar) with a $8.99 Netflix service, and Hulu for free Family Guy episodes, it would be Hollywood trying fighting for their survival instead of Netflix, who will diversify on its brand name alone and start selling widgets with a complimentary free movie rental. Do not think this is true, why is REDBOX a threat all of the sudden with embargo’s in place? Copy depth couldn’t save the 1000+ Blockbusters & Hollywood Videos from closing, so Studio and Rentrak need to think about life without video stores in 2012.

Submitted by: Kathi Benson
12/31/2009 9:56:54 AM PT
Location:Lebanon, OR
Occupation:video store manager

My customer walked into the Safeway store on Monday and was able to rent "Paranormal Activity" at 3 pm on December 28. This looks like a Redbox, but the name of the owners are DVD Play. Why is it that we've seen Walmart several times break street date. We've seen Redbox break street date. Now another company is breaking street date. It's a shame that the studios are not trying to help the video stores more. The studios have made alot of money off the video store the last 25 years. There also are alot of jobs at stake here in a depressed economy. Wake up America. If you have enough money like Walmart, you can break street date and nothing happens. Now you can walk to a automated box, pay your money, and put hundreds of people out of work. A video store gives your neighbors jobs, the store costs money to run (which the money goes back into your community), it gives the video distributors jobs, it gives local companies work for supplies it needs, and it gives money back to the community by offering donations and support to the community. Does everyone want to only be able to shop at the Walmart's of the world or shop out of a automated box. Is this why this country is in the shape we are in?

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