RIP Redbox. The DVD kiosk business will shut down and fire 1,000 people

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I can’t help but feel a sense of nostalgia and sadness as I read about the impending liquidation of Redbox. As someone who grew up renting DVDs from those iconic red kiosks at my local grocery store, it’s hard to believe that this once-prominent business is on the brink of collapse.

Redbox, the company behind the popular red kiosks for DVD rentals at supermarkets and drugstores with easy film pick-ups, is no longer functioning.

As a movie enthusiast, I was disappointed to learn that Chicken Soup for the Soul Entertainment, the umbrella company of the business I love, received court approval on Wednesday to transition from Chapter 11 to Chapter 7 bankruptcy. This means they plan to liquidate their assets and unfortunately, let go of around 1,000 employees, including possibly those behind my beloved movies.

I’ve seen my fair share of business struggles throughout my career, but Chicken Soup for the Soul Entertainment’s recent filing for Chapter 11 bankruptcy really hits close to home for me. Having worked in the media industry myself, I know firsthand how crucial timely payroll is for employees. It’s disheartening to hear that staffers at this company weren’t receiving their wages, leading to such a drastic financial step. My heart goes out to those individuals and their families who are now facing uncertainty during these challenging times.

The company’s failure to keep up with the required size and funds, along with its difficulty in responding to evolving consumer preferences for streaming and on-demand digital videos, led to Redbox’s demise. Essentially, Redbox was overwhelmed by the shift of the home entertainment industry towards streaming services.

The downturn occurs concurrently with accusations of mismanagement leveled against the company’s primary creditor, HPS Investment Partners.

In a Chapter 11 bankruptcy filing, a business seeks protection from creditors to develop a restructuring plan and keep operating with the goal of settling outstanding debts. On the other hand, a Chapter 7 bankruptcy signifies that the company has decided to liquidate its assets and cease operations, resulting in the complete satisfaction of debts through the sale of these assets.

In the year 2002, Redbox emerged as an innovative project under McDonald’s umbrella. It gained traction by leveraging the widespread appeal of DVDs and offering a cost-effective rental service. Eventually, it evolved into a standalone business.

In 2009, I had the opportunity to visit one of those DVD rental kiosks and rent a DVD for just a dollar a day. Each machine could accommodate up to 700 DVDs and offer around 200 different movie titles. Based on a 2009 Times report, a single kiosk could generate approximately $50,000 in annual revenue after running for three years.

In the year 2022, Chicken Soup for the Soul Entertainment acquired Redbox, which is based in Oakbrook Terrace, Illinois, for a total value of $375 million, paid entirely in company stock.

When I looked at the data back then, Redbox operated approximately 38,000 kiosks across the United States. Chicken Soup for the Soul Entertainment, however, is more than just a subsidiary of Chicken Soup for the Soul LLC, based in Cos Cob, Connecticut. It’s the multimedia branch of this well-known publisher, famous for its inspiring books and pet food line.

The entertainment division of Chicken Soup assumed a large amount of debt to finalize the deal, placing a wager on the longevity of DVD rentals despite the risks. In their official statements, the company attributed the scarcity of new content to the impact of the COVID-19 pandemic and last summer’s Hollywood strikes.

Last year, Chicken Soup for the Soul Entertainment, encompassing the ad-supported streaming service Crackle, reported a significant loss of approximately $636.6 million. According to their Chapter 11 filing, the company’s debts amounted to a staggering total of $970 million, while their assets were valued at around $414 million.

I’ve learned that approximately 24,000 Redbox kiosks still exist based on the latest filing in bankruptcy court. A significant number of these kiosks can be found at Walmart and Walgreens stores. Interestingly, both retail giants are identified as unsecured creditors in the proceedings.

In a court hearing on Wednesday, as reported by the Wall Street Journal, Judge Thomas Horan stated that around one thousand individuals will soon be unemployed without receiving compensation for their previous work.

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2024-07-18 21:41