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Chicken Soup’s Bill Rouhana Was Ready and Willing to Buy Netflix’s Disc Rental Business, But Got No Response

Chicken Soup’s Bill Rouhana Was Ready and Willing to Buy Netflix’s Disc Rental Business, But Got No Response

Bill Rouhana, chairman and CEO of Chicken Soup for the Soul Entertainment, said he was stunned when he heard that Netflix was shuttering its disc rental business.

The move leaves CSSE’s Redbox subsidiary as the single-biggest disc rental dealer in the country, with 32,000 disc-rental kiosks and another 1,500 rolling out at Dollar General stores.

And Rouhana further said he was dumbfounded that Netflix didn’t try to sell him the business before killing it off — particularly since he had tried to buy it several times before.

“We asked a couple of times whether we could buy that business, and they just never responded,” he told Media Play News in an April 19 interview. “We made multiple inquires over the last year, but I guess it just wasn’t important enough for them to deal with.”

Rouhana says he’s not in a position to say whether the decision by Netflix brass to shutter the streamer’s legacy disc-by-mail rental business was a good one or a bad one.

“The economics of our business are very different from the economics of their business,” he said. “The fact that we’re both renting discs is the only thing that is the same, as far as I can tell. And I don’t know the economics of their business. I know they have a lot of discs, they have a deep library and a broad catalog, and they’ve got to do things that may or may not make sense. I think in order to know why they are shutting it down, you need to understand their cost structure and what is inherent in that. I don’t know the economics of how they run their business, so it’s really hard to give an opinion about whether it’s a good idea or a bad idea.”

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Rouhana noted that by ditching disc rentals, Netflix is now out of the new-release home entertainment business, since films rarely go straight to streaming once they finish their theatrical runs — and the ones that do invariably wind up on streamers whose parent company also owns a studio, like Max and Warner Bros., Peacock and Universal, and Paramount+ and Paramount.

“I expect it’s going to be good for us,” he said. “We’re going to have all those first-run movies on disc, and we’re going to have them within a few miles of the million customers they’re giving up — and it’s going to be cheaper. We’re going to pick up a lot of their customers.”

Who, exactly, are these customers who are in still in the habit of renting discs?

“I think they are basically people who are interested in getting premium entertainment, but at a lower cost — and also people who like the quality of what a disc gives you as opposed to streaming,” Rouhana said.

Does he think media and entertainment executives, who largely live on the two coasts, have a misconception about how the rest of America consumes entertainment at home?

“Without a doubt,” he said. “Most of the people I know who are in the category of media and entertainment executives on the coast have multiple streaming services, couldn’t care less what they cost, pay no attention to them and don’t even watch some of them … they pay for them anyway, and don’t think twice about it. That’s not what most people can afford, especially in this time, where there’s inflation and all these concerns about the economy. People are not looking to waste money. So if they can find ways to get premium entertainment at a lower cost, they’re going to do it.”

How long will the disc business last?

“I think a decade or more,” Rouhana said. “Legacy consumption of media and other things always goes a lot longer than people speculate. People change their habits much more slowly than is commonly thought.”

And yet Redbox kiosks are not an endgame unto themselves, Rouhana maintains. They serve a strategic purpose beyond merely generating revenue, and CSSE plans on exploiting their strategic value even more in the coming months and years, he said.

“There are actually two different categories of plans,” Rouhana said. “One is other ways to use them — for example, digital out-of-home screens that we can sell ads against, and as that business evolves and grows, the advertising per screen could actually pay for the cost of maintaining the Redboxes indefinitely, even if we weren’t selling DVDs.

“And the other thing is that the Redbox kiosks serve as a marketing platform for all the other digital programs we offer — our TVOD, our AVOD, our FAST businesses — so they are a great platform for marketing and promotions. They serve many purposes, and are a key part of growing the business.”

 

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