Redbox, the operator of the red DVD rental boxes once known for making movies available for quick rental in grocery stores and pharmacies, has struggled.
The company's parent company, Chicken Soup for the Soul Entertainment, received court approval Wednesday to change its bankruptcy filing from Chapter 11 to Chapter 7, with plans to liquidate assets and lay off 1,000 employees.
Chicken Soup for the Soul Entertainment filed for Chapter 11 bankruptcy protection earlier this month after reports that staff members had not been paid.
The company's decline was a result of its struggle to maintain scale and funding and adapt to changing consumer viewing habits. Redbox was hit hard by the home entertainment industry's shift to streaming and digital video-on-demand options.
The collapse came amid allegations of mismanagement by the company's main lender, HPS Investment Partners.
Chapter 11 bankruptcy allows a business to develop a restructuring plan to survive and repay its debts, and is protected from creditors. Chapter 7 liquidation means a business gives up.
Redbox was founded in 2002 as an experiment by McDonald's and has since become a business in its own right, capitalizing on the popularity of DVDs and the convenience of a cheap rental system.
In 2009, customers could go into one of the kiosks and rent a DVD for $1 a day, with each machine stocked with 700 DVDs and 200 movies. According to a 2009 Los Angeles Times report, one of the kiosks could bring in about $50,000 in annual revenue over the course of three years of operation.
In 2022, Oak Brook Terrace, Illinois-based Redbox was acquired by Chicken Soup for the Soul Entertainment in an all-stock deal worth $375 million.
At the time, Redbox had 38,000 kiosks in the U.S. Chicken Soup for the Soul Entertainment is a subsidiary of the Cos Cob, Connecticut-based publishing company known for its uplifting book series and pet food line of the same name.
The Chicken Soup Entertainment division took on heavy debt to complete the deal, a risky bet on the future viability of DVD rentals. In public filings, the company blamed the COVID-19 pandemic and last summer's Hollywood strike for stifling the flow of new content.
Chicken Soup for the Soul Entertainment, which also owns the ad-supported streaming service Crackle, lost $636.6 million last year and listed total liabilities of $970 million and assets valued at $414 million in its Chapter 11 bankruptcy filing.
According to bankruptcy court filings, Redbox still has about 24,000 kiosks remaining, many of which are installed in Walmart and Walgreens stores, which are listed as unsecured creditors.
“1,000 people will lose their jobs and won't even be paid for the work they've done,” Judge Thomas Horan said during a court hearing on Wednesday, according to The Wall Street Journal.
Company Town sAdvanced eWith Editor-in-Chief Ryan Fonder yeahYeah rResearcher Scott Wilson contributed to this report.
