Redbox with its refrigerator-sized kiosks often found outside drug stores and in grocery vestibules in numerous cities across the U.S. is going the way of Blockbuster Video and videotapes.
Redbox and its deeply indebted parent company, Chicken Soup for the Soul Entertainment (CSSE), filed for bankruptcy in Delaware recently. CSSE claimed $970 million in debts, more than double its $414 million in assets, and informed the court it has at least 1,000 creditors and perhaps as many as 5,000.
Among those it owes money to are Comcast’s NBC Universal, Sony Pictures, Walgreens, Vizio, Paramount Global, Warner Bros Discovery, Walmart and BBC Studios.
CSSE, based in Cos Cob, Connecticut, acquired Redbox 14 months ago for $50 million in stock and assumption of $325 million in debt. The acquisition was meant to support CSSE’s expansion plans from its streaming and book publishing business into other forms of media.
At its height in 2013 Redbox realized annual revenue of $1.97 billion, and it once had 43,000 kiosks in the U.S. and Canada.
A Los Angeles court entered a $16.7 million judgment against the company in favor of NBC Universal on June 20 after Redbox failed to pay a scheduled installment of a settlement the parties reached earlier in May.
NBC Universal sued Redbox in February because of unpaid DVD and online rental royalties. In its complaint the studio alleged that Redbox stopped paying royalties “around the summer of 2022…” CSSE initially sought bankruptcy under Chapter 11, intending to reorganize its debts. But then U.S. bankruptcy judge Thomas M. Horan heard from Richard Pachulski, a lawyer who was retained by Redbox’s corporate parent, Chicken Soup for the Soul Entertainment, to represent the company in its bankruptcy case.
During that hearing, Horan learned that Chicken Soup for the Soul Entertainment failed to pay payroll taxes for nine months. CSSE also didn’t pay for health insurance for two and a half months – but kept deducting employee health insurance contributions from paychecks until those paychecks stopped coming in mid-June.
The company also kept deducting 401k contributions from paychecks, and that money reportedly is unaccounted for. When Horan asked Pachulski whether Chicken Soup actually paid those employee contributions into their retirement accounts, the attorney replied, “I would be shocked if they were properly dealt with.”
Chicken Soup for the Soul Entertainment had just $25,000 in the bank when it filed for bankruptcy, Pachulski told Horan.
“There is no means to continue to pay employees, pay any bills, or otherwise finance this case. It is hopelessly insolvent,” Horan said. “Given the fact that there may also be at least the possibility of misappropriation of funds that were held in trust for employees, there is more than ample reason why this case should be converted” to Chapter 7 liquidation, he asserted.
Consequently, instead of reorganizing its debt the company will sell its holdings. Its 1,000 employees are expected to be laid off and the fate of its 24,000 kiosks is uncertain.
CSSE records show that Redbox does, or once did, have kiosks throughout Oklahoma, including Lawton, Fort Sill, Altus, Altus Air Force Base, Apache, Burns Flat, Carnegie, Chickasha, Duncan, Elgin, Fletcher, Frederick, Hobart, Rush Springs, Walters and Waurika.
CVS seeks permission to scrap Redbox kiosks Less than a week after CSSE’s bankruptcy was converted to dissolution, CVS, one of America’s largest pharmaceutical retailers and a Redbox creditor, quickly petitioned Horan for permission to “remove and dispose of” more than 2,500 DVD rental kiosks that are inside or in front of its stores.
CVS had a contract allowing Redbox to rent or sublease space in its stores for the kiosks, which charged customers around $1 per day to rent blockbuster film titles. That contract “expired in 2023 and Redbox became obligated” to remove its kiosks.
Redbox refused to remove the kiosks for more than six months prior to filing its bankruptcy petition on June 29, CVS alleges. “Throughout that time, it has generally behaved as though the kiosks were abandoned, although it did remove a very small number of them once it was threatened with a preliminary injunction in a state court lawsuit.”
Failure of Redbox to remove its kiosks “has caused and continues to cause CVS substantial and unjustifiable economic harm, as well as damages for loss of use and enjoyment of its premises that are not readily financially compensable,” CVS contends.
CVS has locations at which its leases have already expired or will soon, “and the presence of the kiosks at these locations has exposed CVS to potential liability to its landlords.” At other locations, CVS has “remodeling plans that have been thwarted by the presence of these large unwanted machines.”
Judge Horan had not acted on CVS’s petition by July 22, but a colleague did approve a request from an auto rental company.
Auto rental company repossessing vehicles Automotive Rentals Inc. and ARI Fleet filed suit in New Jersey federal district court in May to recover vehicles that ARI owned and leased to Redbox, and to be compensated “for breach of the lease documents…” ARI and Redbox signed a lease and fleet management services agreement in 2017, and in October 2022 CSSE executed a guaranty whereby it “irrevocably and unconditionally guaranteed full payment when due of all obligations of Redbox to ARI” in connection with the lease agreement.
Subsequently ARI leased “numerous” vehicles to Redbox.
Just 11 months later Redbox failed to pay a $240,000 invoice, and six additional invoices that brought the total owed to $1,227,150, ARI alleges. Redbox agreed to pay ARI seven weekly installments of $78,000 starting Sept. 1, 2023, and one payment of $681,150 on Jan. 19, 2024. Redbox paid only $476,991, according to court records.
On June 20, 2024, Redbox agreed to assist ARI and its agent, Syngin, in repossession of the vehicles. A week later the New Jersey federal District Court Clerk ordered the U.S. Marshal to take possession of the vehicles and deliver them to ARI.
And one month later U.S. Bankruptcy Judge Craig T. Goldblatt in Delaware ordered Redbox “and any of the other debtors whose agents and/or employees are in possession of any” of ARI’s vehicles to “cooperate in the return of the vehicles to ARI as soon as possible.”
DVDs being replaced by streaming services “The obituary for physical movie rental has long been a work in progress, dating back to Blockbuster Video filing for bankruptcy protection in 2010,” IndieWire wrote.
“Netflix, then primarily a DVD-by-mail service, destroyed the brick-and-mortar business. Within a few years, it was clear that streaming was Netflix’s future although it didn’t mail its last DVD until September 2023.”
Best Buy told CBS MoneyWatch last October that it would halt sales of physical movie media in its stores and online this year. Walmart, Target, and Barnes & Noble “still carry a torch for physical media, but DVDs increasingly populate their bargain bins,” IndieWire reported.
Thus, it appears that DVD and Blu-ray discs may follow videotape cassettes into the technological dustbin.
However, rather than viewing it as a death knell, some contend the shift in the market may open a door for physical media enthusiasts.
“If Disney can outsource to Sony, why couldn’t the studios outsource to places like Criterion or Kino Lorber,” an international film distribution company based in New York City, Leah Aldridge, a professor of Film and Media Studies in Chapman’s Dodge College, told IndieWire. 22 cases consolidated in CSSE bankruptcy CSSE asked Horan to consolidate Chapter 11 cases for its 22 companies “for administrative purposes only” so that the cases would be jointly administered under the case number assigned to Chicken Soup for the Soul Entertainment Inc.
The 22 subsidiaries include Locomotive Global, a film and series production house in India.
It also includes Irvine, Calif.-based Pivotshare Inc., a 14-year-old software and technology company which, according to Bloomberg, “designs and develops technology that allows users to monetize and stream their videos and audio content across leading devices.”
Another subsidiary is TOFG LLC, which CSSE acquired when it purchased some of the assets of 1091 Media less than a year and a half ago, on March 1, 2022, for $15.55 million, according to a filing with the U.S. Securities and Exchange Commission.
TOFG LLC “does business under the name 1091 Pictures,” which “provides full-service distribution services to film and series owners … and has a library of approximately 4,000 licensed films and television shows,” CSSE reported to the SEC.
CSSE “believes that the acquisition of the assets of 1091 Media will accelerate the Company’s strategy to build the leading independent AVOD (ad-supported video on demand)…” The judge approved CSSE’s consolidation application on July 2 and scheduled an Aug. 20 meeting among the CSSE/Redbox creditors.