Redbox CEO Eyes Crackle Plus as AVOD Role Model

On the heels of Chicken Soup for the Soul Entertainment’s acquisition of Redbox Entertainment, Redbox CEO Galen Smith, in a memo to employees, said the transaction would in part help the legacy DVD rental kiosk vendor transition to ad-supported streaming video distribution.

Chicken Soup, which owns and operates Crackle Plus, one of the original AVOD streaming platforms, is set to acquire Redbox in an all-stock transaction valued at $375 million.

Galen said Crackle Plus would “perfectly” complement Redbox’s legacy business as well as newer digital offerings. Launched originally in Canada in 2004 as Grouper, Sony Pictures Television acquired the platform in 2006 and renamed it Crackle. Sony sold the service to Chicken Soup in 2019. Other Crackle Plus streaming platforms include AVOD Popcornflix, Truli (faith-based content), and SVOD Pivotshare.

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“Chicken Soup for the Soul Entertainment also acquires and distributes original video content, much like we have started to do through Redbox Entertainment,” Smith wrote in the memo.

The executive characterized AVOD as a “massive market opportunity” in AVOD, with Chicken Soup offering substantial capabilities, including technology and existing advertising relationships, to Redbox.

“Crackle Plus has one of the top AVOD network groups, with more than 40 million monthly active users,” Smith wrote. “Together with Redbox’s 40-million-plus loyalty members, our content library and free ad-supported streaming television (FAST), we’ll be able to offer consumers unparalleled choices for a phenomenal value.”

In the memo, Galen he recognized that many Redbox employees would have questions about the company’s future and their jobs.

“I want to be transparent — we don’t have all the answers today, but we’ll do our best to provide you with what we know,” Smith wrote. “A lot of questions about how the two companies will be integrated are still being made and will be decided over the coming months once the deal has been completed, which is expected to be in the second half of 2022.”

Smith said he plans to address all issues of the corporate merger in a future company Town Hall.

“I encourage you all to join, and we’ll do our best to answer your questions. We’ll also be sharing a list of Frequently Asked Questions to address some we expect you may have. I want to sincerely thank you for all you have done for Redbox. It hasn’t always been easy, but this team is resilient, and we couldn’t have reached this outcome without you.”

Analyst: Chicken Soup Saved Redbox

Redbox Entertainment shares may have fallen 35% in value May 11 since the legacy DVD kiosk vendor announced it would be acquired by Chicken Soup for the Soul Entertainment, operator of the Crackle Plus ad-supported streaming video service, for $375 million in stock.

But Redbox’s digital businesses faced an uncertain future without the fiscal lifeline thrown by Chicken Soup, according to Los Angeles-based Wedbush Securities media analyst Michael Pachter, who says the transaction values Redbox shares around 65 cents per share.

Michael Pachter

Redbox shares, which closed May 10 at $5.60 per share, are now trading at $3.58 in heavy trading.

Pachter believes that despite Crackle Plus being better established within the AVOD market, Redbox’s brand name carries more recognition among consumers. The analyst believes Chicken Soup will be able to meld the streaming service within Redbox TV, in addition to bringing greater resources to digital distribution in a market swamped with big-spending AVOD competitors such as Fox Corp.’s Tubi and Paramount Global’s Pluto TV.

“Redbox’s post-IPO performance did not inspire confidence for its long-term potential, and the company faced bankruptcy without a significant cash infusion,” Pachter wrote in a note. “Had [Chicken Soup] not stepped in… it is unclear how long Redbox would be able to fund its own digital expansion, which is key to its viability as a public company.”

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Chicken Soup for the Soul Entertainment to Acquire Redbox

Chicken Soup for the Soul Entertainment, owner/operator of the ad-supported Crackle+ streaming platform, is set to acquire Redbox Entertainment, operator of more than 38,000 DVD rental kiosks and branded digital entertainment properties, in an all-stock transaction valued at $375 million.

The deal continues a harried fiscal existence for Redbox since going public last October following a merger with a special purpose acquisition company, or SPAC. Redbox earlier this year disclosed it lost $140 million in 2021, its businesses undermined by the pandemic and supply issues. Last month, it laid off 10% of its workforce, or about 150 employees.

The combination of Chicken Soup for the Soul Entertainment and Redbox is intended to create an integrated direct-to-consumer media platform. The combined company will have increased scale across content production and distribution, with a large content library, extensive digital capabilities in AVOD, TVOD, PVOD and FAST, and access to millions of targeted customers, including nearly 40 million Redbox Perks members.

Together, the combined companies will have some of the industry’s top AVOD platforms, one of the fastest growing segments of the overall entertainment industry. According to a recent study by IAB, ad spending on connected TV platforms increased 57% from 2020 to 2021 and is expected to increase another 39% this year.

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“Today marks a transformative moment for Chicken Soup for the Soul Entertainment and an inflection point for the ad-supported streaming industry,” William J. Rouhana Jr., chairman and CEO of Chicken Soup for the Soul Entertainment, said in a statement. “Our acquisition of Redbox will accelerate the scaling of our business as it combines complementary teams and services to create the streaming industry’s premier independent AVOD.”

“By joining forces, we will accelerate Redbox’s transition from a physical to high growth digital media company and be the only entertainment provider truly focused on value for consumers,” added Galen Smith, CEO of Redbox. “This deal provides Redbox stockholders with the opportunity to participate in the significant near- and long-term upside potential of a diversified and growing company with greater scale and resources.”

The combination is expected to be accretive to pre-tax earnings in 2023, with numerous opportunities to cross-sell each company’s customer base across digital properties, distribute Screen Media titles via Redbox kiosks and leverage tech and know-how to fully capitalize on Redbox’s AVOD opportunity. The company expects to deliver annual-run rate cost synergies in excess of $40 million in 2023. Chicken Soup for the Soul Entertainment expects that the combined company will exit 2022 with a run-rate exceeding $500 million of revenue and $100 million to $150 million of Adjusted EBITDA.

Under the terms of the agreement, which has been approved by the Boards of Directors of both companies, Redbox stockholders will receive a fixed exchange ratio of 0.087 of a share of class A common stock of Chicken Soup for the Soul Entertainment per Redbox share. Following the close of the transaction, Chicken Soup for the Soul Entertainment stockholders will own approximately 76.5% of the combined company, and Redbox stockholders will own approximately 23.5% of the combined company, on a fully diluted basis.

Redbox stockholders holding approximately 86% of the Redbox voting power have entered into a voting agreement to approve the transaction. Chicken Soup for the Soul Entertainment stockholders holding approximately 91% of the voting power of Chicken Soup for the Soul Entertainment have delivered a written consent approving the transaction.

The transaction is expected to close in the second half of 2022, subject to the receipt of required regulatory approvals and other customary closing conditions. Upon closing, the combined entity will retain the name Chicken Soup for the Soul Entertainment and will continue to trade under the ticker symbol “CSSE” on the Nasdaq stock exchange.

Redbox Lays Off 150 Employees, Delays Fiscal-2021 Report Release

Redbox Entertainment April 1 disclosed it laid off 150 employees, or 10% of its workforce, due to the ongoing impact of the pandemic. The venerable home entertainment brand also informed the Securities and Exchange Commission that it would delay filing its 2021 annual fiscal report for the period ended Dec. 31, 2021.

Redbox said the staff cuts, which occurred March 29, would help decrease annual operating costs by approximately $13.1 million, and that it would incur a one-time restructuring charge of about $3.8 million, with the bulk due to related to severance costs.

As previously disclosed, Redbox, which became a publicly traded company last October, said its 2021 business encountered higher marketing and content expenditures without increased offsetting revenue.

Jan. 28 the company borrowed the remaining availability under its revolving credit facility, and management has been actively taking steps to decrease monthly costs, delay capital expenditures and increase revenue.

Redbox is also exploring a number of potential strategic alternatives with respect to its corporate or capital structure and seeking financing to fund operations and one-time restructuring costs. The company’s board has established a strategic review committee to, among other things, consider and oversee strategic alternatives or transactions that may be available with respect to its corporate or capital structure.

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Redbox, in the filing, said the strategic review process, and ongoing financing negotiations, have involved significant resources and have been a priority for management, diverting significant management time and internal resources away from reviewing and completing its financial statements.

Redbox to Bow Its Thriller ‘Assailant’ on Digital and Via Its Streaming App March 22

Redbox Entertainment, the original content division of Redbox, has announced that March 22 will be the premiere date for the thriller film Assailant.

The film will premiere On Demand via the Redbox streaming app, which is available on devices that include Roku, Vizio, Samsung, LG, iOS and Android, as well as through digital retailers that include iTunes and Vudu, among others.

Starring Poppy Delevingne (Kingsman: The Golden Circle), Chad Michael Collins (Extinct), Casper Van Dien (All American), and Jeff Fahey (“Lost”), Assailant is written and directed by Tom Paton (400 Bullets). The film follows a British couple, Zoe and Jason, who book a private cruise in the Caribbean in hopes of rekindling their relationship and saving their marriage. After a seemingly harmless bar fight between the husband and a mysterious drifter, the situation devolves into a dangerous game of cat and mouse. The couple must fight together to save themselves from the Assailant.

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Assailant is produced by MSR Media’s Philippe Martinez and Highfield Grange Studios’ Alan Latham, with Lee Beasley and Karinne Behr from MSR Media, Kirsty Bell, Sherborne Media’s Alastair Burlingham and Charlie Dombek, and Redbox C.E.O. Galen Smith serving as executive producers. Production financing was provided by Sherborne Media.

 

Redbox Entertainment Nabs Rights to ‘King of Killers’ From ‘Underworld’ Mastermind Kevin Grevioux

Redbox Entertainment and Red Sea Media Inc. (RSM) Feb. 16 announced they have signed worldwide rights for the action-adventure film King of Killers. The film was written by and will be directed by actor, screenwriter, and comic book writer Kevin Grevioux, who was behind the successful “Underworld” franchise for Sony Pictures.

Based on Grevioux’s graphic novel of the same name, King of Killers tells the story of a group of international assassins who are contracted to take out the most dangerous killer in the world. The film will be shot in Winnipeg, Canada later this month. Redbox Entertainment will release the film domestically later this year in theaters and, on the same day, through its Redbox On Demand digital video store as well as on disc at its Redbox kiosks.

King of Killers stars Frank Grillo, best known for his appearances in the “Captain America” and “Purge” films.  It will be produced by Shane Walker and Angel Gracia of Creative Tank, Michael Wright and Christopher Rush Harrington of Dovetail Media, Juliette Hagopian of JuliJette Inc., Channel 56 Films, and Todd Slater of Slater Brothers Entertainment. Redbox CEO Galen Smith and Marc Danon of Redbox Entertainment will serve as executive producers, along with Grant Slater of Slater Brothers Entertainment, Matthew Helderman, Luke Taylor and Tyler Gould from BondIt Media Capital and Roman Kopelevich and Roman Viaris of RSM.

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The deal was brokered by Roman Kopelevich, CEO of RSM, and Todd Slater, partner at Slater Brothers Entertainment on behalf of the producers, and by Danon for Redbox Entertainment. BondIt Media Capital is providing direct financing for the film.

Grillo is represented by Management 360, Creative Artists Agency, Paul Hastings and 42West. Grillo recently wrapped on the biopic Lamborghini, based on the life story of Ferruccio Lamborghini, founder of the iconic Italian sports car company.

Grevioux said: “I am thrilled that Redbox Entertainment and Red Sea Media are on board as our partners. Similarly to Underworld, I created the graphic novel to be a franchise in a series of action films. Now with our incredible cast, we have a property that audiences around the world will have a lot of fun experiencing.”

“After reading the script and seeing Kevin’s amazing track record with Underworld, we know this will be an action-packed film that will thrill audiences,” said Redbox’s Smith. “We’re looking forward to releasing King of Killers later this year.”

Redbox Spreads Wall Street Charm, Talks Up Loyalty Members, Distribution Channels

Since going public in October with special purpose acquisition company Seaport Global Acquisition Corp., Redbox Entertainment has been on overdrive.

In addition to pursuing digital distribution deals and content licenses to jumpstart its ad-supported VOD and free ad-supported streaming television businesses, the company is launching, in the first half of the year, a channels platform, which similarly to Amazon, will feature third-party subscription streaming services.

“That way, you have all of your content in one place,” CEO Galen Smith said at this week’s virtual 24th Annual Needham Growth Conference.

The venerable kiosk disc rental company has also added 1 million loyalty members (consumers earning points renting and buying games, DVDs, Blu-ray Discs, and On Demand movies), to start 2022 with 40 million — up from 27 million in 2018, according to Redbox.

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Smith said the brand is undergoing a “radical transformation from a one-window legacy DVD business to a multi-window, multi-faceted digital entertainment company.” He said Redbox has 400 million estimated weekly retail impressions, 600 million monthly media impressions, 43 million app downloads and 46 million email subscribers.

“The app downloads were started as a way for people to find a movie at a local kiosk and reserve it ahead of time,” Smith said. “Now, we’ve been able to morph that and offer digital experience opportunities as well.”

Indeed, the Redbox Perks program is enticing its 40 million members with bonus points to try AVOD, FAST, transactional VOD and soon, SVOD, with a single sign-on, payment, app platform.

“It allows us to give additional value, additional currency to consumers trying things,” Smith said. “We want to create this one destination, to make it very easy for consumers to find all of their digital content in one place.”

Smith said 58% of Redbox’s consumers (55% women) are loyalty members, with 71% identifying themselves as “deal hunters,” two times more likely to rent a movie than the average consumer, while 70% also admit to being late technology adopters.

“That’s why I think our Redbox Perks program is so valuable bringing them along,” he said.

Smith said the brand is currently embedded on 8 million Roku streaming media devices on sale at Walmart stores nationwide with a $5 discount coupon inside.

“We think we’ll be able to move over some of our Walmart customers over to a Roku streaming stick, and also find new customers that might not have experienced Redbox before,” he said. “We want to give them this incredible, single app experience.”

Redbox has also licensed three branded content channels to third-party platforms, including Roku and online TV syndication. The company’s AVOD service has 1 million monthly average users across 9 million unique devices featuring more than 100 channels. Since test-launching Redbox Channels, the platform has sold 62,000 bundled subscriptions (feature a free kiosk movie rental) as part of its SVOD market test.

“We’re really excited, once this launches in the second quarter, what it will do for our business,” Smith said. “Creating this stickiness overall, in terms of coming to Redbox for more and more [the consumers’] entertainment needs.”

Specifically, Redbox contends the average kiosk-only consumer spends about $22 a year on rental discs, while consumers that also acquire digital movies spend about $70. Consumers who engage in disc rentals, transactional VOD and retail, spend about $100. When combining ad-supported content and SVOD to the mix, Smith said Redbox can generate from $215 to $295 in incremental revenue per select customers.

“To be really clear, it’s not going to everyone,” Smith said. “Some [consumers] will continue to do one thing. But we’re excited about the opportunities that presents.”

‘Venom: Let There Be Carnage’ Tops Redbox Charts

Sony Pictures’ Venom: Let There Be Carnage debuted at No. 1 on both the Redbox disc rental chart and the Redbox On Demand chart the week ended Dec. 19.

The film, based on the character from Marvel’s Spider-Man comics, an alien symbiote who possesses a photographer named Eddie Brock (Tom Hardy), earned $212.5 million at the domestic box office and arrived on DVD and Blu-ray just before the theatrical release of Spider-Man: No Way Home. The sequel to 2018’s Venom finds Eddie and Venom battling a death row killer (Woody Harrelson) who becomes possessed by a symbiote named Carnage.

No. 2 on the Redbox disc rental chart, which tracks DVD and Blu-ray Disc rentals at Redbox’s more than 40,000 red kiosks, was Lionsgate’s Dangerous, a thriller with Scott Eastwood as an ex-con who violates his parole to investigate how his brother died. The cast also includes Mel Gibson, Famke Janssen, Kevin Durand and Tyrese Gibson.

Down a spot from the previous week, to No. 3, was Warner’s Cry Macho, directed by and starring Clint Eastwood as an aging former rodeo star and washed-up horse breeder in 1979 who takes a job from an ex-boss (Dwight Yoakam) to bring the man’s young son home from Mexico. 

The previous week’s top rental, Disney-owned Marvel Studios’ Shang-Chi and the Legend of the Ten Rings, dropped to No. 4.

Universal Pictures’ actioner Copshop dropped to No. 5 on the disc rental chart and was No. 7 on the Redbox On Demand chart after topping the digital chart the previous week.

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The Redbox On Demand chart, which tracks digital VOD and sellthrough transactions, saw Universal’s 2000 live-action How the Grinch Stole Christmas rise a spot to No. 2, and the same studio’s 2018 animated The Grinch climb to No. 3.

The No. 4 digital title was Sony Pictures’ Spider-Man: Far From Home, getting a boost from its aforementioned sequel’s theatrical release.

Rounding out the top five Redbox On Demand titles was Disney-owned 20th Century Studios’ The Last Duel, a drama from Ridley Scott about the last sanctioned duel in France in the 14th century.

Top DVD and Blu-ray Disc Rentals, Redbox Kiosks, Week Ended Dec. 19:

  1. Venom: Let There Be Carnage — Sony Pictures
  2. Dangerous — Lionsgate
  3. Cry Macho — Warner
  4. Shang-Chi and the Legend of the Ten Rings — Disney/Marvel
  5. Copshop — Universal
  6. Jungle Cruise — Disney
  7. Free Guy — Disney/20th Century
  8. Ron’s Gone Wrong — Disney/20th Century
  9. The Last Son — Redbox
  10. Candyman (2021) — Universal

 

Top Digital (VOD + Sellthrough), Redbox On Demand, Week Ended Dec. 19:

  1. Venom: Let There Be Carnage — Sony Pictures
  2. How the Grinch Stole Christmas (2000) — Universal
  3. The Grinch — Universal
  4. Spider-Man: Far From Home — Sony Pictures
  5. The Last Duel — Disney/20th Century
  6. Free Guy — Disney/20th Century
  7. Copshop — Universal
  8. Elf — Warner
  9. The Addams Family 2 — MGM
  10. Old — Universal

 

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Redbox Licenses FAST Streaming Platform to LG Televisions

Redbox Dec. 13 announced it has signed a distribution agreement with LG Electronics to include its branded free ad-supported television (FAST) channels on LG Smart TVs, including their LG OLED Smart TVs.

LG Channels is a free streaming service, providing users with a wide selection of programming, including movies, TV shows, news, sports and children’s content.

“Redbox is known for being a destination for movies, and these FAST channels will bring a wide range of great movies and TV for viewers via LG Channels,” Chris Yates, GM of Redbox on Demand, said in a statement.

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Redbox will begin streaming the following via the LG Channels platform:

Redbox Free Movies — Movie lovers can watch the most-popular movies streaming 24 hours a day, completely free. Now streaming is the Academy Award-nominated City of Angels starring Nicolas Cage and Meg Ryan, The Postman starring Kevin Costner, and First Kill starring Hayden Christensen and Bruce Willis.

Redbox Rewind — Watch favorite movies from the ’70s, ’80s and ’90s. Films streaming in December include Forever Young, starring Mel Gibson, JFK, starring Kevin Costner, and The Muppets Take Manhattan

Redbox War and Westerns — Movies streaming now include The Duel, starring Woody Harrelson and Liam Hemsworth, In the Line of Fire, starring Academy Award winner Clint Eastwood, and The Homesman, starring Academy Award Winner Tommy Lee Jones and Academy Award Winner Hilary Swank

Redbox Holiday — Movies streaming this month include A Very Country ChristmasSnowbound for ChristmasBorrowed HeartsA Very Corgi Christmas and A Puppy for Christmas

Redbox Romance — Coming in January, titles include The Seat Filler, starring Kelly Rowland, Duane Martin and Mel B.; Reality of Love, starring Bradley Cooper, Jason Priestley and Emma Caulfield; and Broken English, starring Parker Posey, Drea de Matteo and Melvil Poupaud.

Analyst: DVD Rentals Will Drive Redbox’s Digital Transformation

Redbox’s move toward ad-supported VOD, free ad-supported streaming TV (FAST), and transactional VOD is enough to convince Wedbush Securities media analyst Michael Pachter to begin following the stock.

Redbox is in the midst of a reboot, transforming itself from a kiosk disc rental retailer to a multiplatform entertainment distributor. It’s a similar strategy to the one that erstwhile by-mail DVD rental pioneer Netflix employed 14 years ago in transitioning from physical media rentals to subscription streaming.

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Michael Pachter

While much of Wall Street turned its back on packaged media years ago, Pachter contends Redbox’s legacy kiosk business will continue to be a driver of the company’s revenue and digital aspirations. In fact, the analyst believes Redbox only needs to convert from 10% to 15% of its 40 million existing DVD customers to digital to reach more than $1 billion in annual revenue.

Specifically, Pachter contends Redbox’s user base consists primarily of value-conscious customers with inadequate access or disposable income to allow them to stock up on multiple SVOD services. With Redbox pushing free ad-supported streaming, is base users are more likely to recognize the brand and become consumers of advertising on the Redbox channel.

“All the while, these customers are likely to remain loyal to the Redbox [DVD] brand, and we expect the company to capture a reasonable share of consumption of its AVOD and VOD service offering,” Pachter wrote in a note.

For 2023, Redbox is guiding to total revenue of $1.1 billion, with 66% of revenue coming from DVD rentals and the remaining 33% of revenue coming from the growing digital segment. That compares with second-half 2021 projections with 89% of revenue coming from DVD, and 11% from AVOD.

“Redbox’s 39 million loyalty members can [be leveraged] to market digital products…and Redbox makes the transition from disc simple and in-expensive,” Pachter wrote.