Lions Gate signs 5-year distribution deal with $1 DVD rental outfit Redbox

Lions Gate cuts deal to supply DVDs to Redbox

LOS ANGELES — Lions Gate Entertainment Corp. became the latest movie studio to agree to supply $1-per-night DVD rental kiosk company Redbox, but the move still leaves Hollywood divided over the cheap rental service.

Lions Gate agreed to supply Redbox, a subsidiary of Bellevue, Wash.-based Coinstar Inc., with movie discs on the same day they are offered for retail sale, from Sept. 1 through Aug. 31, 2014, according to a regulatory filing Tuesday.

Coinstar said it estimates Redbox will pay Lions Gate $158 million over the life of the deal, although Lions Gate may withdraw after two years.

The filing was worded similarly to a document Coinstar filed last month in its five-year, $460 million deal with Sony Corp.’s movie division. In that agreement, Redbox says it agreed to destroy 80 percent of the discs from Sony after their rental lives ended, but sell the remainder for $7 each. The deal with Lions Gate is identical, a Redbox spokesman said.

“We believe that the Redbox model will ultimately expand the business by increasing the number of impulse rentals and by putting packaged media rentals in places where none existed previously,” said Steve Beeks, Lionsgate president and co-chief operating officer. “This agreement gives us tremendous placement for all our films and lowers the impact of low-priced previously-viewed DVDs being sold into the market, which we saw as a growing issue.”

Other Hollywood studios, such as News Corp.’s 20th Century Fox, and General Electric Co.’s Universal Pictures, have moved to cut off supply to the kiosk unless it agrees to delay rentals until more than a month after DVDs are available for sale, in the hopes of preserving demand for higher-priced DVD purchases.

A federal judge in Delaware is expecting to rule soon on a lawsuit Redbox filed against Universal, in which it claimed antitrust laws had been broken.

Even if studios cut off supply, Redbox has kept its more than 15,000 machines full of new-release DVDs by buying through retailers.