Redbox has movie studios worried

Los Angeles Times: DVD sales historically have been how movie studios earn a profit on movies, because ticket sales are barely enough to offset production and marketing costs. Some studios believe that consumers will forgo buying DVDs if they have a cheap option to rent movies.

"You could make a bit of an argument that rental is cannibalizing [DVD purchases] in 2008, especially in a recession year, where everyone is watching their nickels," said Tom Adams, a video industry analyst.

The spread of Redbox's kiosks, coming as DVD sales started to decline, has triggered alarms within Universal Studios. Last year it sought to withhold DVDs from Redbox until 45 days after release to prevent competition with sales. When Redbox rejected the deal, Universal ordered wholesalers to cut off supplies. Redbox then sued Universal, alleging restraint of trade.

Click to continue