Redbox goes up for auction following a wild bankruptcy saga
Redbox is getting ready for one final sale.
The defunct DVD rental chain’s assets, and those of its corporate siblings Crackle and Chicken Soup for the Soul Entertainment, are being auctioned off in New York later this month, according to a court filing published Monday morning.
The asset sale is just the latest chapter in Redbox’s tumultuous downfall: Once one of the country’s biggest DVD vendors, the rental chain saw its revenue evaporate overnight during the pandemic, leading to its bankruptcy in June of 2024.
Much of this had to do with consumers switching to streaming, but the exact circumstances of Redbox’s demise remain highly contested: Last month, the trustee in charge of the bankruptcy proceedings filed a lawsuit against Chicken Soup for the Soup Entertainment’s former executives and board, alleging that the company and its subsidiaries were “victim of mismanagement and pillaging by insiders on a scale rarely seen with public companies.”
For sale: Everything but the kiosks
When the assets of Redbox and its corporate siblings go on sale on April 23, potential buyers will be able to bid on Redbox’s and Crackle’s trademarks, patents and other intellectual property. Among other things, the sale also includes various rights associated with hundreds of movies and TV shows produced and distributed by Chicken Soup for the Soul Entertainment subsidiary Screen Media Films. Titles mentioned in Monday’s filing range from Jeepers Creepers to Machine Gun Woman to the 2021 Nicholas Cage flick Willy’s Wonderland.
While it’s hard to estimate what the assets will ultimately be selling for, there does appear to be some interest in those film catalogs. The court-appointed trustee noted in a legal filing earlier this year that he had received offers “in excess of $100 million.”
Notably exempt from the firesale: Redbox’s once-ubiquitous red rental kiosks. The filing does not explain why the DVD vending machines aren’t being sold at this point, but one reason could be that many of them have already found their way to landfills and Ebay auctions.
When Redbox went bankrupt, it still operated about 27,000 kiosks, located in front of grocery stores, pharmacies and other retailers. Redbox had stopped paying many of these retail partners contractually owed commission fees long before it went bankrupt, leading to lawsuits from major chains including CVS and 7-Eleven. After the company went under, the kiosks became even more of a nuisance for retailers, with Albertsons complaining in a legal filing that its electricity bill for the machines amounted to $184,000 a month.
Eventually, the bankruptcy court granted most retailers the right to dispose of the kiosks themselves. A few machines were saved by enthusiasts, while others apparently have been stripped for parts that are now being sold on Ebay.
“Wildly unrealistic projections”
The story of Redbox’s downfall has few parallels in modern corporate history: The company surpassed $1 billion in revenue in 2018, and had long planned a transition to streaming. Those plans were thrown into upheaval when the pandemic hit in 2020, with many of its consumers embracing much-larger streaming competitors like Netflix and Disney+ overnight. Redbox’s revenue declined to around $250 million in 2021, and the company was effectively out of money by early 2022.
That’s when Chicken Soup for the Soul Entertainment, a subsidiary of the Chicken Soup for the Soul book publisher, swooped in to acquire Redbox for $375 million. The deal included the assumption of $325 million in debt, but Chicken Soup for the Soul Entertainment’s leadership forecast at the time that DVD rentals would quickly recover.
That didn’t happen. Instead, Redbox’s revenue continued to crater. The company found itself in a cash crunch, unable to buy new DVDs, which further depressed rentals. In early 2024, the company’s cash on hand was so low that it wasn’t able to pay most of its bills, even leaving its service technicians stranded because corporate credit cards meant to pay for gas for company vehicles stopped working for days at a time. Employees would later discover that they had lost their health insurance while still working for the company.
This was all too expected, according to the bankruptcy trustee. Redbox’s recovery “never could have reasonably been expected to happen” and were based on “wildly unrealistic business projections and plans,” the trustee claimed in his recently-filed lawsuit.
The lawsuit also alleges that Chicken Soup for the Soul Entertainment’s corporate leadership used the company as their “personal piggy bank” by relying on unusual fee arrangements: Chicken Soup for the Soul Entertainment and its subsidiaries were obligated to pay 10% of their revenues to the book publisher every month in exchange for management services as well as the right to use the publisher’s trademarks.
These fees allegedly ballooned to $18.4 million dollars a year following the Redbox acquisition, despite the fact that Redbox was losing money hand-over-fist. Payments even continued after Chicken Soup for the Soul Entertainment had stopped paying payroll taxes in late 2023.
The trustee now wants executives to pay back those fees; any money recovered through such legal actions as well as this month’s auction is likely going to go to the company’s primary lender HPS, which is reportedly owed $500 million.