Redbox and its iconic red movie-rental kiosks are officially closing down, marking the end of an era for physical media enthusiasts. The company, which began its journey in 2002 and reached its peak in 2013, became a household name with its bright-red touch-screen kiosks located at popular stores like Walmart and CVS. However, Redbox’s parent company, Chicken Soup for the Soul Entertainment (CSSE), has filed for Chapter 7 bankruptcy in Delaware, leading to the liquidation of all its assets.
The decision to liquidate comes after CSSE initially filed for Chapter 11 bankruptcy protection, citing nearly $1 billion in debt owed to various media businesses and retailers, including Sony Pictures Home Entertainment and Walgreens. The bankruptcy filing also means that over 1,000 employees will be laid off, with reports indicating that many workers did not receive their paychecks and had their medical benefits cut in late June. HPS Investment Partners, a lender for CSSE, has accused the company of gross mismanagement in court filings.
Redbox was acquired by CSSE in 2022 and became one of the company’s flagship video-on-demand streaming services. CSSE also managed over 20,000 DVD-rental kiosks across the country, along with other ventures like the video entertainment network Crackle and a Chicken Soup for the Soul streaming platform. CSSE is a subsidiary of Chicken Soup for the Soul LLC, known for its motivational book series and pet food brand.
The closure of Redbox’s DVD rental kiosks is reminiscent of the downfall of Blockbuster, the rental store chain that filed for bankruptcy in 2010 and subsequently closed almost all of its 9,000 stores. Today, only one Blockbuster location remains, in Bend, Oregon. Representatives from CSSE and Redbox have not responded to requests for comment.
Redbox’s decline has been gradual, as streaming services have become the preferred method for watching movies. The company reportedly peaked in 2013 with a revenue of $1.97 billion and had over 40,000 kiosks throughout the US and Canada. However, the rise of streaming giants like Netflix, which also started as a DVD rental service, has made physical media rentals increasingly obsolete.
In its bankruptcy filing, CSSE listed debts totaling $970 million, owing money to major studios and retailers such as Universal Studios, Sony Pictures, Warner Bros., Paramount Pictures, Lionsgate, Walgreens, and Walmart. The company is also under investigation after HPS Investment Partners alleged self-dealing and mismanagement by one of its controlling shareholders, William J. Rouhana Jr. HPS accused Rouhana of failing to pay workers’ salaries and health benefits, among other allegations.
During a Delaware court hearing, Judge Thomas Horan ruled that Redbox’s publicly traded owner, CSSE, would be shut down by an independent trustee. This decision came after an earlier effort by the company to secure fresh funds to pay employees failed. The judge expressed his dismay over allegations that money deducted from employee paychecks for health benefits was not used for that purpose, calling the claims “incredibly disturbing” and “sickening.”
Managers of bankrupt companies often have the latitude to continue operating while attempting to restructure under Chapter 11. However, lenders and judges can force a company to liquidate under the supervision of a court-appointed trustee if the business is poorly managed or if creditors allege misconduct. In this case, HPS Investment Partners had previously accused former CSSE CEO and controlling shareholder William J. Rouhana Jr. of mismanaging the business. Rouhana’s lawyer has disputed these allegations.
When CSSE filed for Chapter 11, it initially intended to sell off some business lines and restructure others. However, these plans were abandoned after HPS accused Rouhana of failing to pay workers or fund their health insurance. CSSE’s lenders attempted to arrange an emergency loan to cover employees’ back pay, but with the company’s shutdown, employees will not be paid for work from June 29 onwards. Judge Horan stated that he did not want CSSE employees to work “a moment longer.”
Richard Pachulski, a seasoned bankruptcy lawyer representing CSSE, described the scale of the mismanagement as “a train wreck like nothing I’ve ever seen.” The case, filed under Chicken Soup for the Soul Entertainment Inc., 24-11442, is being handled by the US Bankruptcy Court for the District of Delaware.
As Redbox’s website no longer displays its kiosk movie offerings or locations, the company left a brief message for its consumers on social media: “love you guys.” This simple farewell marks the end of a once-beloved service that provided countless movie nights for families across the country.
Source: Wall Street Journal, Variety
