Is Walmart secretly keeping Redbox movie rentals kiosks stocked with DVDs at a discount?
Walmart says no, but Pali Research’s Rich Greenfield implies otherwise in a note written this week (sub req’d).
Greenfield quotes a source who says he saw a Redbox employee buy 100 copies of Ice Age 3 at Walmart. The Redbox employee said “they have a special deal with Walmart.” The Redbox employee told Greenfield’s source he paid with a gift card Redbox provided for him.
This account conflicts with what Redbox is saying about Walmart in a new lawsuit. Redbox is accusing Walmart of selling limited amounts of DVDs to customers, as few as three at a time, according to the LA Times.
Hollywood studios won’t sell DVDs to Redbox because they think it devalues DVDs, undermining sales.
When asked if Redbox has a relationship with Walmart as a workaround, a Redbox spokesperson tells us it “employs alternative acquisition channels, which includes major third-party retailers.”
A Walmart spokesperson denies both the Redbox lawsuit allegation, and the implication of Greenfield’s source, telling us, “I can share for a fact that Walmart does not participate in purchase deals or any types of discounts on DVDs with any purchaser,” adding “Walmart has not instructed stores to limit sales of DVD movies at this time.”
Regardless of what these companies say, Redbox is struggling to get movies in its kiosks. Greenfield doesn’t think the lack of movies will hammer the company too badly, but if it keeps buying DVDs at retail prices, it raises some issues:
Letʼs assume that Redbox buys at least 40 DVDs per week to freshen up its 600-700 DVD library in each kiosk. If half of those are from studios that do not distribute to Redbox, it implies that on average Redbox is buying 20 DVDs per week per kiosk at a retailer, which in most cases appears to be Wal-Mart. With over 21,000 kiosks that implies 22 million DVDs need to be purchased growing to over 30 million as Redbox expands its kiosk installations to over 30,000 by year-end 2010.
- What seemed “doable” (work around-wise) with just Universal, is starting to sound very difﬁcult to comprehend.