Fox pulls discs from Redbox

Move follows breakdown in negotiations between firms

Hollywood's counteroffensive against dollar DVD rentals has escalated.

Fox effectively has enlisted in Universal's campaign against Redbox and other discount-rental chains by ordering wholesalers to stop supplying discs to Redbox kiosks during the first 30 days after Fox film and television titles hit the market. The move, which News Corp. president Chase Carey hinted at Wednesday during an earnings conference call, follows the collapse of negotiations between Fox and Redbox over terms of a direct product agreement.

Sony recently struck such a deal with the kiosks king, becoming the first studio to agree to supply Redbox with product directly. In exchange, Sony secured a Redbox pledge to keep the studio's used DVDs off the resale market.

Redbox disc resales have been a second major aggravation for Hollywood studios along with the chain's dollar rentals, which studios say are diminishing rental revenue and undermining DVD sales.

Redbox sued Universal in October after that studio ordered wholesalers Ingram and VPD to stop supplying its titles to Redbox within 45 days of release. Universal countersued, and a decision is expected any day from a federal judge in Wilmington, Del.

If the ruling goes against Redbox, other studios are likely to follow Universal in denying Redbox DVDs. But Fox's decision to strike such a posture before the court rules demonstrates how deep anti-Redbox sentiment runs on some studio lots.

Like Universal, Fox will extend its ban on new-release dollar rentals to No. 2 kiosk chain MovieCube, operated by TNR Entertainment. Redbox -- whose 15,000-plus kiosks are located in Wal-Mart, McDonald's and supermarkets run by Kroger, Albertson's and others -- is owned by publicly traded cash-machine company Coinstar.

A Fox insider noted that execs are braced for a Redbox lawsuit in response to the decision to withhold that studio's titles from dollar-rental chains.

A Fox spokesman declined to elaborate on a carefully worded statement issued late Wednesday regarding the policy.

"We invest enormous money, creativity and effort to make entertaining, high-quality Fox movies available throughout the world," the studio said. "In the home entertainment business, Fox offers our movies through bricks-and-mortar retail outlets and online retailers, including both national and regional chains and small mom-and-pop stores, offering consumers a wide selection of new releases and catalog for both rental and purchase. ... Our desire is to maintain for Fox movies a thriving network of distribution serving all types of consumer preferences, on reasonable business terms for Fox as well as our distribution partners."
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