Redbox Shuts Down: Chapter 7 Bankruptcy Liquidation Signals Another Blow To The Demise Of Physical Media

Entertainment|Industry News

By Drew Bryant
July 16th, 2024, theloadoutblog.com

After twenty-two years of business, Redbox is officially closing up show after the company filed for Chapter 7 bankruptcy. This revelation is just the latest blow to the slow and agonizing death of physical media that continues to pervade the entertainment and gaming industries.

Redbox consisted of a network of over 24,000 rental kiosks throughout the U.S. and Canada. The company will also be shuttering its streaming services as part of the Chapter 7 bankruptcy filing. Redbox’s parent company, Chicken Soup for the Soul Entertainment (CSSE), changed its Chapter 11 bankruptcy case to a Chapter 7 liquidation of assets last Wednesday.

With the move to liquidate the company and all viable assets, all employees of CSSE are now unemployed and will not receive any compensation or severance packages from the company. This leaves over 1,100 former employees scrambling to find work in this complex economy and job market we are in today.

Over the last decade, Redbox has seen a steady and gradual decline in sales before CSSE bought the company back in 2020. Redbox witnessed its peak revenue in 2013 at $1.97 billion and once operated over 43,000 kiosks throughout North America. Before closing, the media rental company was operating only half of that number of kiosks.

On June 28th, CSSE filed for Chapter 11 reorganization, listing its debt at $970 million along with consolidated assets of $414 million as of March 31, 2024. Money is owed to companies such as Universal Studios Home Entertainment, Sony Pictures Home Entertainment, Warner Bros. Home Entertainment, Paramount Pictures, Lionsgate, Walmart, and many more.

Last week, Judge Thomas M. Horan of the U.S. Bankruptcy Court for the District of Delaware, who is presiding over the case, granted the change to Chapter 7 liquidation. The judge spoke about the untenable situation CSSE found itself in and how it left their employees with no safety net. He stated, “There is no means to continue to pay employees, to pay any bills,” per the Wall Street Journal. Judge Horan added that a bankruptcy trustee will be appointed to investigate if there was a misappropriation of funds held in a trust for employees. He added, “1,000 people are about to lose their jobs, and they’re not even going to be paid for work that they did.”

For the last four weeks before CSSE filed for Chapter 11 bankruptcy, the company had failed to pay its employees and vendors for work done. In the court documents, HPS, the company’s top lender, alleged gross mismanagement by the company.

In a declaration supporting the bankruptcy of CSSE and Redbox, Chairman and CEO Bill Rouhana Jr. asserted that the company was in dire financial straits, due partially to the refusals by its lenders “to live up to their obligations, resulting in asserted defaults and/or contractual terminations across critical content and service providers.” On June 11th, CEO Rouhana Jr. unilaterally dissolved the company’s board of directors and officially stepped down on June 24th.

Redbox was acquired by CSSE in August 2020 in a deal valued at $370 million, in which CSSE claimed $359.9 million of Redbox’s debt. CEO Rouhana Jr. believed that CSSE would be able to handle the debt load due to the predictions of returning to one-third of the business revenue from back in 2019. In his declaration on the bankruptcy, he stated, “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.”

Redbox was launched back in 2002 when physical media was still king. Over the next two decades, the company grew and expanded, and its red kiosks were seen in grocery stores, Walmart, CVS, and fast food restaurants. Known for its convenience and affordable pricing, along with the diversity of locations, it was widely popular with consumers. During its first five years, the company would surpass Blockbuster in terms of locations.

Redbox was also known for its video game rentals. In 2017, the company launched Redbox Demand. Then, in 2019, Redbox stopped renting video games, much to many customers’ disappointment. Finally, in an attempt to be profitable, Redbox attempted Redbox Free Live TV in 2020.

Over the last twenty years, we have seen the slow demise of physical media, with the death of Hollywood Video and Blockbuster. The growth of Netflix and streaming services puts us in a whole new world as we watch the death of physical media distribution brands such as Redbox.