DVD Rental Kiosk Patented... Redbox Sued

from the sue-away dept

In 1998 I worked with a company that was trying to deliver CDs and (eventually) DVDs via rental kiosks. At the time, the idea was hardly new. In fact we've detailed the long list of failed companies who got into the kiosk business over the last few decades. But, apparently, they all had the wrong strategy. What they should have been doing is suing over patent infringement. We were just talking about Redbox, one of the few companies that's made a successful go of DVD kiosks, and its lawsuit against Universal Studios, but it appears that the company is now being sued for patent infringement as well, by a company called DVDplay. The patent itself seems to cover a disc-based kiosk that's connected to the internet. Reading through the claims, it's difficult to see how there wasn't any prior art on this stuff or that it wasn't an obvious iteration on what had come before. But, really, what does that matter once you've got a patent and you can just sue away?

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Hollywood Again Tries To Stop Innovation: Threatening Redbox DVD Rentals

from the felony-interference-with-a-business-model dept

I have to admit that when I first heard about the whole Redbox concept of renting DVDs from a kiosk I was skeptical, but that was mainly because previous experiments had all been quite expensive with very limited selection. However, in actually offering super cheap prices ($1 rentals), I've been hearing from many Techdirt readers who swear that Redbox is fantastic and, at such a cheap price, often easier than downloading the movie.

So, wouldn't you know it? Hollywood is trying to block Redbox from doing business.

The company has filed a lawsuit against Universal Studios for trying to coerce the company into signing a ridiculous, business-destroying agreement -- and threatening to try to stop others from supplying Redbox movies if the company didn't agree. Specifically, Universal wanted Redbox to agree to:

• wait 45 days after a DVD's release date before renting it;
• pay a royalty of 40% of gross rental revenues;
• promise that prices never dip below $0.99 per night; and
• destroy all previously rented DVDs rather than offering them for purchase for $7, as Redbox currently does.

In other words, Universal Studios is basically trying to kill off Redbox, a company that has innovated in its business model, and, in doing so, effectively trying to circumvent the first sale doctrine by controlling how a copyrighted product can be resold. Universal threatened that if Redbox did not agree to these business-destroying clauses, it would stop supplying movies to any distributor who supplies Redbox. Effectively, that would mean that those distributors would stop supplying Redbox, rather than lose Universal as a supplier. This is, quite clearly, a case of corporate bullying. It's also yet another example of how the movie studios want to stop any innovation in the industry that doesn't come directly from the studios.

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Amazon Quietly Dumps DVD Rental Business; Guess Netflix Isn't So Easy To Beat

from the netflix-never-dies dept

You really have to hand it to Netflix. Every time some new (big) entrant enters the market and prognosticators insist that Netflix is going down, the company has managed to keep on chugging along -- while the competitors eventually capitulate. Remember back in 2002, when Wal-Mart entered the DVD rental market, and everyone thought that Netflix had no chance? Fast forward a few years, and Wal-Mart was shutting down its efforts and handing them over to Netflix instead.

Then there's Amazon. In 2004, Netflix itself broke the news that Amazon was entering the market, causing plenty of concern. After all, Wal-Mart was a big stodgy company, where you could (possibly) predict that it wouldn't be able to succeed in a web-based endeavor. However, Amazon was a very different story. Except that it wasn't. Amazon realized just how difficult it was to do a good job with DVD rentals in the US, and chose to focus just on the UK, hoping to build up experience there without having to compete head-on with Netflix. There was even talk that Amazon might follow Wal-Mart into just letting Netflix handle its own DVD rentals in the US. No matter what, it appears that Amazon's little experiment didn't go all that well. It has now sold off the DVD rental business in the UK and Germany to competitor Lovefilm (while also taking a stake in the company).

Either way, it's yet another example of a big company assuming it could easily take on Netflix in the DVD rental business and finding that it wasn't nearly as easy as expected. While Blockbuster is still hanging in there, Netflix has shown time and time again that what looks like a simple business isn't always so easy to replicate. This is an important lesson for those who insist that big companies can always just come in and crush small upstarts. That's not the way things always work. An idea is one thing. Execution is something entirely different.

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