Redbox Parent Company Files for Bankruptcy, Owes Millions to Retailers and Movie Studios
Introduction:
Chicken Soup for the Soul Entertainment, the parent company of Redbox, recently filed for Chapter 11 bankruptcy protection. This comes almost two years after the ill-fated merger with a heavily indebted DVD kiosk operator. The bankruptcy filing lists assets and liabilities of at least $500 million each, highlighting the financial challenges faced by the company.
The Fallout of the Merger:
In 2022, Chicken Soup acquired Redbox, taking on nearly $360 million in debt. The merger gave the company access to a nationwide network of approximately 27,000 Redbox kiosks and an additional streaming platform. However, this acquisition did not improve the company’s finances. By the end of the first quarter of 2024, Chicken Soup reported a net loss of $53 million and an accumulated deficit of $937 million. The company also stopped paying its bills, straining relationships with creditors and content providers.
Debt and Creditors:
The bankruptcy filing reveals that Chicken Soup owes significant amounts to major retailers, movie studios, landlords, car vendors, and other business partners. Retail giants Walgreens and Walmart, where thousands of Redbox kiosks were operated, are among the largest creditors. Major Hollywood studios such as Universal, Sony, Lionsgate, Warner Bros, and Paramount are also owed money. The company’s financial struggles have strained its relationships with content providers, leading to termination and non-renewal notices.
Challenges with Post-Pandemic Movie Rentals:
Chicken Soup expressed optimism about keeping its debt under control in a statement filed with the SEC. The company expected Americans’ demand for physical kiosk rentals to return to pre-COVID levels. While post-pandemic movie rentals did rebound to some extent, they were not strong enough to generate sufficient cash flows and working capital for the business. This lack of revenue further exacerbated the company’s financial difficulties.
Legal Troubles and Default:
In April, Chicken Soup received termination and non-renewal notices from content suppliers and other service providers. It also faced default notices under certain leases and from lenders. While the financing partners had the ability to evict the company, repossess vehicles, or call in their debts, they had not taken such actions at that time. However, in June, the company defaulted on its debt, leading to further financial fallout.
Redbox’s Court Order:
Adding to Chicken Soup’s troubles, Redbox was hit with a court order after missing an initial payment as part of its settlement with Universal over unpaid DVD and online rental royalties. The settlement allowed Redbox to make three installments totaling $16.7 million, with the first payment of $4 million due by June 10. However, a Los Angeles court ruled against Redbox on June 20, ordering them to repay the full $16.7 million owed to Universal.
Conclusion:
The bankruptcy filing by Chicken Soup for the Soul Entertainment highlights the challenges faced by the parent company of Redbox. The ill-fated merger and financial struggles have led to significant debts owed to major retailers, movie studios, and other business partners. Despite optimistic expectations for a return to pre-COVID levels of demand, post-pandemic movie rentals were not enough to sustain the business. Legal troubles, including missed payments and court orders, have further complicated the company’s financial situation. As Chicken Soup works on developing a plan to repay its creditors, it remains to be seen how the future will unfold for Redbox and its parent company.
