Redbox sues 20th Century Fox over DVD rentals

By Tom Hals and Sue Zeidler

WILMINGTON, Del/LOS ANGELES (Reuters) - A brewing battle between Redbox and some members of Hollywood intensified on Wednesday as the DVD kiosk leader sued Twentieth Century Fox for trying to bar it from renting films on the day of release.

Twentieth Century Fox, a unit of News Corp, is the second big studio involved in litigation with Redbox, a unit of Coinstar Inc, which rents films for $1 per night at more than 17,000 automated kiosks around the United States.

In October, Redbox sued General Electric Co's Universal after it told wholesalers to stop supplying titles to Redbox within 45 days of release. Universal countersued.

Redbox on Wednesday said Fox, which owns the "Star Wars" and "Ice Age" titles, prevented wholesale distributors from giving it DVDs of recently released films because Redbox refused to honor a 30-day blackout period before renting them at its kiosks.

During the blackout, Fox films are only available in higher-cost outlets. Redbox asked a federal court judge in Delaware to find Fox's copyrights unenforceable.

"Fox's actions constitute copyright misuse, violate the antitrust laws and tortiously interfere with Redbox's existing supply contracts with its distributors," the complaint said.

Fox said it spent several weeks trying to negotiate a deal with Redbox that offered varying terms that would give Redbox the option of buying DVDs either on the initial DVD release date or with a 30-day window.

Fox said the lawsuit would limit its ability to make business decisions, and called Redbox's claims "meritless."

The studio declined comment on whether it would countersue.

Redbox said in a statement it would continue to provide access to all major new releases, including those from Fox.

While some in Hollywood fear the chain's $1 rentals are hurting rental revenue and DVD revenues at a when the overall DVD market is shrinking and hurting studios' bottom lines, other studios like Sony Corp and Lions Gate Entertainment have sought to work with Redbox.

Lions Gate on Tuesday said it Redbox will help its business by getting DVDs in front of people when they are more likely to make impulse buys in announcing a five-year deal that it said should generate $200-300 million in revenue over its lifetime.

Companies like Lions Gate are taking a smart approach by working with Redbox, said RBC Capital Markets David Bank.

The Fox and Universal lawsuits followed efforts by those studios to get more attractive revenue sharing terms than Redbox may have offered, said Caris & Co analyst David Miller.

"I think these studios want a revenue sharing arrangement like ones they have with Blockbuster and Netflix and they want terms that are accretive," he said. "Typically what happens when negotiations break down, one party sues."

(Reporting by Tom Hals in Wilmington and Sue Zeidler in Los Angeles. Editing by Robert MacMillan)