Wednesday, July 24, 2024

RIP Redbox: DVD Kiosk-Rental Business Is Shutting Down With Parent’s Bankruptcy Liquidation

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Call it Deadbox.

In another nail in the coffin of physical media, Redbox is shutting down after more than two decades of serving up DVD rentals from thousands of kiosks across the U.S.

Redbox’s network of 24,000 DVD rental kiosks and its streaming services will be shut down after its parent company, Chicken Soup for the Soul Entertainment, converted its Chapter 11 bankruptcy case to a Chapter 7 liquidation proceeding on Wednesday. With the move to liquidate its assets, all of Chicken Soup for the Soul Entertainment’s employees are now unemployed and will not receive severance or extended benefits. As of late June, the company said it had 1,033 employees.

Redbox’s business had been in decline for more than a decade before Chicken Soup for the Soul Entertainment bought it in 2020. Its revenue peaked in 2013 at $1.97 billion, and the chain at once time had operated more than 43,000 kiosks in the U.S. and Canada stocked with movies, TV shows and games.

On June 28, CSSE filed for Chapter 11 reorganization, listing total debts of $970 million and consolidated assets of $414 million as of March 31, 2024. Creditors included Universal Studios Home Entertainment, Sony Pictures Home Entertainment, Warner Bros. Home Entertainment, Paramount Pictures, Lionsgate, BBC Studios Americas, Walgreens, Walmart and Vizio.

On Wednesday, Judge Thomas M. Horan of the U.S. Bankruptcy Court for the District of Delaware, who is overseeing Chicken Soup for the Soul’s bankruptcy case, granted the company’s request to convert to a Chapter 7 liquidation. “There is no means to continue to pay employees, to pay any bills,” Horan said, per the Wall Street Journal. He added that a bankruptcy trustee will be appointed to investigate whether funds held in trust for employees were misappropriated. “1,000 people are about to lose their jobs and they’re not even going to be paid for work that they did,” the judge said.

Chicken Soup for the Soul Entertainment had failed to pay employees and vendors for at least four weeks prior to its Chapter 11 filing. In court documents, HPS, the company’s top lender, had alleged gross mismanagement by the company. Chicken Soup for the Soul Entertainment chairman and CEO Bill Rouhana Jr., in a declaration supporting the bankruptcy petition, claimed that the company’s financial straits were in part due to “refusals” by its lenders “to live up to their obligations, resulting in asserted defaults and/or contractual terminations across critical content and service providers.”

Chicken Soup for the Soul Entertainment closed the acquisition of the struggling Redbox business in August 2020, in a deal valued at $370 million. With the acquisition, Chicken Soup for the Soul Entertainment assumed $359.9 million of Redbox’s debt. In his declaration, Rouhana said CSSE’s ability to service the Redbox debt was “predicated on a partial return to pre-COVID levels in the number and cadence of theatrical releases that were available to the company for its kiosk network, as well as cost synergies. The corresponding rebound in demand for physical kiosk rentals was expected to return to approximately one-third of 2019 levels.”

Chicken Soup for the Soul Entertainment, which had been publicly traded, is a subsidiary of Chicken Soup for the Soul LLC, which publishes the famous book series and produces pet food under the Chicken Soup for the Soul brand name.

In addition to Redbox, Chicken Soup for the Soul Entertainment operated Crackle and other streaming services and produced, acquired and distributed films and TV series through its Screen Media and Chicken Soup for the Soul TV Group subsidiaries.

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