February 20, 2011 in Business

Sources: Disney raises DVD prices for Redbox, Netflix

 

LOS ANGELES — Amid calls from some on Wall Street to choke off the supply of newly released DVDs to discount movie rental services, the Walt Disney Co. has quietly decided to raise its wholesale prices on new-release DVDs for Redbox and Netflix, according to people familiar with the matter.

The move marks a subtle shift in Disney’s relationship with Netflix Inc. and Redbox Automated Retail LLC, and one that stands in contrast with most of Hollywood’s dealings with the two rental giants. Other studios have refused to supply DVDs to Netflix and Redbox until 28 days after they are released out of concern that low-cost rentals will undercut DVD sales. Disney, on the other hand, all along has been supplying Netflix and Redbox with DVDs at the same time they go on sale, albeit at a lower price.

Disney will now charge Redbox, which is owned by Coinstar Inc., and Netflix the full wholesale rate — as much as $17.99 — for its DVDs, the people said. That’s more than studios often charge their largest wholesale customers and less than big retailers like Wal-Mart charge consumers for the popular new releases.

The change started with “Secretariat,” which was released on DVD on Jan. 25, even though the studio said nothing public about it at the time.

Disney believes that its family-friendly fare, particularly animated films, is the type that consumers want to own for repeated viewing and therefore is not likely to be hurt by rentals, according to a person with knowledge of the situation.

How the new policy with affect Disney remains to be seen. By increasing the prices Redbox and Netflix pay for new releases, Disney could either increase the revenue it generates from those companies or force them to buy fewer copies and reduce their supply. That in turn could push frustrated consumers who want to rent toward other options like cable and Internet video-on-demand.

Redbox President Mitch Lowe confirmed that his company had reached a new agreement with Disney but said it would continue to offer Disney DVDs the same day they go on sale for $1 per night. A Netflix spokesman declined to discuss the issue. However, “Secretariat” is currently available to the company’s subscribers.


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