Warner, Redbox strike deal on DVDs, avert lawsuit

LOS ANGELES (Reuters) - Warner Bros has struck a deal with Redbox that will force the rental-kiosk chain to hold back on renting new DVD titles until 28 days after their release, settling a lawsuit the fledgling company filed last year.

The settlement between Coinstar Inc’s Redbox and Time Warner Inc’s movie studio brings the upstart company in line with mail service Netflix Inc, which last month agreed to a 28-day delay on new Warner releases.

Redbox sued Warner Bros last year, accusing it of antitrust violations after Warner and two other studios sought to cut off Redbox’s access to their DVDs. Some Hollywood studios in turn accused Redbox of undercutting the sales value of their DVDs, by renting them for as low as $1 a day.

“The 28-day window enables us to get the most from the sales potential of our titles and maximize (video on demand) usage,” Kevin Tsujihara, president of Warner Bros Home Entertainment Group, said in a statement.

Redbox said the agreement with Warner Bros would allow it to obtain DVDs from the studio at a lower cost.

Last year, Warner Bros, General Electric-owned NBC Universal and News Corp’s Twentieth Century Fox cut off direct sales of DVDs to Redbox.

To overcome that obstacle, Redbox had its employees buy DVDs at retail outlets, but recently major retailers, including Wal-Mart Stores Inc, limited new-release DVD sales to five per customer, which hurt Redbox.

It was unclear what the deal between Redbox and Warner Bros will mean for the rental chain’s lawsuits against two other studios that cut off its DVD supply, Fox and NBC Universal.

Redbox could not be reached for comment.

It will begin implementing its 28-day delay on new DVD titles from Warner Bros in March, and the agreement runs through January 2012. The kiosk chain has also agreed to destroy Warner Bros DVDs after it finishes renting them, rather than re-sell them as it has done.

Coinstar shares were up 6.2 percent in afterhours trade after closing at $27.11 on the NASDAQ.

Reporting by Alex Dobuzinskis; Editing by Bernard Orr