Should rental companies like Redbox be allowed to offer movies as soon as they come out on DVD?

Redbox thinks so. But Hollywood studios are in fits over the idea. And that friction is creating a war between Redbox and Disney (DIS).

Walt Disney Studios is refusing to sell any DVDs to Redbox, Netflix (NFLX) and other rental companies until 28 days after they go on sale, The Los Angeles Times reports. This is a change from past practice, in which Disney sold DVDs to Redbox the same day the discs hit stores.

Disney is clearly worried that it won't sell as many DVDs in that first month if people could rent them. "The switch indicates that the Burbank media giant has adopted the view held by Warner, Universal Pictures and 20th Century Fox that $1.20 per night rentals from Redbox cut into more profitable DVD sales and video-on-demand rentals," writes Ben Fritz of the Times.

So what did Redbox, owned by Coinstar (CSTR), do in response? It sent employees out to retail stores to buy "John Carter" and other DVDs. And then it added those DVDs to its rental kiosks. Redbox coyly says it's getting the movies through "alternative means."

"John Carter" came out in stores on June 5. Redbox says it will have the DVD for rent by June 12.

Redbox has been willing to work with Hollywood in the past. It holds off on Universal and the Newscorp-owned (NWS) 20th Century Fox movies for the first month because it eventually buys the DVDs from those studios at a big discount, Fritz reports.

But Redbox is less agreeable with Disney and Warner Bros., owned by Time Warner (TWX). It's buying Warner DVDs from the store after Warner asked it to wait a whopping 56 days to offer DVDs for sale.

Netflix, by the way, has been willing to play nice with Hollywood because it doesn't count on new releases for much of its business. Netflix emphasizes its streaming videos over disc rental, and it doesn't much care if customers can't rent "John Carter" for a month. At least, it doesn't care enough to do battle with Hollywood.

Redbox is developing its own streaming service with Verizon, estimated to cost around $6 per month. For more information on that service, see the following video.

Post continues below.
For now, Redbox's business model relies much more on new releases. It needs a current lineup for those spontaneous rentals at drugstores and convenience stores. It needs "John Carter" so much, in fact, that it's willing to sacrifice the discount it normally gets from the studios in order to have the movie early.

There isn't much that Hollywood can do in retaliation.

Deadline.com has an interesting discussion in the comments about this issue. Here's what some observers are saying:

• "Studios should make the window reasonable so Redbox and others would volunteer to keep it, because in the end Redbox has every right to rent the DVDs when they become available to the public, if they’re willing to pay the same price."

• "The real problem here is that Redbox isn’t revenue-sharing. They're basically like your buddy that buys a DVD and then loans it out to everyone. That disc finds itself in 4 or 5 different homes."

• "Consumers that are going to buy are going to buy consumers that are going to rent are going to rent, and people that are going to steal on [BitTorrent] are going to do that, nothing is going to change."

More from Top Stocks

• "Mad Men" gets dark, racy with Jaguar brand
• Facebook stock draws record short interest
• Lululemon stock flops even as earnings soar