Sony Allows to Continue Redbox Distribution Agreement

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Sony isn't taking advantage of an opportunity to terminate a DVD distribution agreement with Redbox.

Coinstar, the parent company of Redbox, announced the development in a 8-K filing this morning. Sony had a five-year deal that runs through September 2014, but had the right to terminate the agreement this September if it so chose. The studio has waived that right, according to Coinstar's filing with the SEC.

It wasn't long ago that many Hollywood studios were at odds with Redbox after the rental-kiosk chain bought and rented out new movie titles soon after their DVD release. Redbox settled many of the disputes, getting DVDs at discounted prices in exchange for agreeing to delays. Warner Bros., for example, now gets a 56-day delay from time of DVD release.

Sony's move indicates that the parties are happy with the current state.

"With three years of data to analyze, we believe it is a positive sign that Sony has not seen any adverse impact from the Redbox agreement and did not follow Warner Bros.’lead in pushing for a delay," says B. Riley analyst Eric Wold in a research update.

The next test for Redbox will come in April 2013 when 20th Century Fox's DVD distribution agreement is scheduled to expire.

But Wold believes that shouldn't be a problem. He doesn't expect a change in terms and adds, "In terms of relevance, Sony was a greater concern than Fox ... given that Sony generated 12.5% of box office in 2011 and 15.2 percent YTD compared to 9.6 percent and 9.5 percent, respectively, for Fox."

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