If consumers figure it's only worth $1 to see a movie at home — instead of the $4.50 or so charged by rental chains and video on demand — then it could "cripple the economics of today's movie business," Pali Research analyst Richard Greenfield said in a recent note.
Universal was first to fight back: Last year it insisted that Redbox not rent the studio's new DVDs until 45 days after they're available elsewhere. When Redbox refused, Universal told the kiosk firm's top wholesalers to cut off its supply of the studio's DVDs.
Redbox asked the U.S. District Court in Delaware to find Universal guilty of violating antitrust and copyright laws. Redbox still offers Universal flicks, often after buying its DVDs at retail.
Universal declined to comment for this story, but told the court that the case simply involves Redbox's desire to get Universal's DVDs "on terms that are at odds with the terms on which Universal wants to sell them."
Fox last week began asking wholesalers to wait 30 days before selling its new releases to Redbox.
Hollywood is divided, though: Disney is supplying new releases. Last month Sony agreed to do the same — on DVD, not Blu-ray — for five years; Redbox will destroy used discs when it's through renting. "It's difficult to fight against a consumer trend like this," Sony Pictures Home Entertainment President David Bishop says.
On Tuesday Lionsgate also reached a five-year deal with Redbox.
Blockbuster, says it wouldn't mind if stores got DVDs before they hit the kiosks. That way new discs bought for the stores would "move from the shelves to the vending channel, and then we'd have an advantage with significantly (lower) cost of goods," Keyes says.
But Redbox says that its kiosks with their $1-a-day discs have changed the entire video-rental game. "This has put the power of the decision in the customer's hands." Lowe says.