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Broadcasting & Cable
Broadcasting & Cable
Business
Daniel Frankel

Redbox Owner Chicken Soup Makes Another Overture to Netflix for Its Sunsetting DVD Rental Business

Redbox

Chicken Soup For the Soul Entertainment, which acquired Redbox under fire-sale circumstances last summer for a mere $375 million in stock and debt assumption, now wants to buy Netflix's sunsetting DVD rental business, too. 

Netflix announced on Tuesday that it will soon shutter the physical media operation that first put it into business 25 years ago. That came a day after Chicken Soup announced from NAB in Las Vegas that it will add 1,500 Redbox DVD rental kiosks in Dollar General Stores nationwide over the next few years, with disc rentals at kiosk locations perking up. 

Chicken Soup CEO Bill Rouhana told the Penske Showbiz Trades that he has already been rebuffed "three or four times" by Netflix's "corporate development people," prior to Netflix's Tuesday announcement. 

“I’d like to buy it,” Rouhana told the trade. “I wish Netflix would sell me that business instead of shutting it down. ... This could be a great boon to us because now there are a whole bunch of people who are going to look for a new place to get their DVDs, and we’re close to 90% of them based on where our kiosks are located." 

The Penske Media Group trade reached out to Netflix, which said it still intends to end its DVD.com business in September. No plans have been announced as to what Netflix will do with its warehouses full of DVD and Blu-ray titles. 

Before the Dollar General infusion, Chicken Soup said its Redbox kiosk count had dwindled to around 32,000 -- down from a peak of 43,500 in 2012. 

With 39 theatrical titles entering the rental pipeline this year, Chicken Soup believes the physical media business, particularly in regions in which Dollar General is proliferate, is poised for a resurgence. 

“We believe in it, and we believe it’s going to be around for a while. Like most legacy things, it’s a lot harder to kill them than people say, I believe,” Rouhana noted.

Notably, the kiosk rental business, almost all of which belongs to Redbox, was in rapid decline well before the pandemic disrupted the theatrical pipeline.  

The Digital Entertainment Group, which tracks the physical rental and sale business based on data provided directly by studio suppliers, said the DVD kiosk business generated $884.59 million in pre-pandemic 2019, down 19.44% from 2018.

DEG stopped breaking out kiosk rentals as an individual category several years ago in its public reports. However, the research company said overall physical disc rentals were down year over year by 16.65% to $502.35 million last year.  

Netflix's DVD unit has steadily declined in recent years, with revenue falling to $146 million in 2022 vs. $183 million in 2021 and $239 million in 2020. 

In addition to renting discs at its kiosks, Chicken Soup generates outdoor advertising revenue at its Redbox locations. It also mines data from 42 million Redbox customer signups to aid its AVOD, FAST and TVOD streaming business -- a factor Netflix might be considering as it demurs on Rouhana's overtures. 

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