The iconic red kiosks that dotted countless corners and store entrances across the United States are becoming a thing of the past. In a move signaling the end of an era for movie rentals, Redbox is shutting down its DVD rental kiosks nationwide. The closure comes as Redbox’s parent company, Chicken Soup for the Soul Entertainment (CSSE), struggled to adapt to the rise of streaming services and the declining demand for DVD rentals.
The shift from Chapter 11 reorganization to Chapter 7 liquidation
On June 28th, CSSE filed for Chapter 11 reorganization, listing total debts of $970 million and consolidated assets of $414 million as of March 31st. Creditors included several media businesses like Universal Studios Home Entertainment, Sony Pictures Home Entertainment, Warner Bros. Home Entertainment, Paramount Pictures, Lionsgate, and BBC Studios Americas, as well as retailers such as Walgreens, Walmart, and Vizio.
CSSE initially planned to raise funds by selling some of its assets and keeping around 100 employees. But on July 10th, the company ultimately filed to liquidate under Chapter 7 bankruptcy in Delaware bankruptcy court, resulting in the closure of all 24,000 Redbox kiosks in the country, the shutdown of all its streaming services, and the layoff of all its 1033 employees.
Judge Thomas M. Horan of the U.S. Bankruptcy Court for the District of Delaware, who oversees CSSE’s bankruptcy case, granted the company’s request to convert to a Chapter 7 liquidation.
“There is no means to continue to pay employees, to pay any bills,” Horan said (via the Wall Street Journal), adding that a bankruptcy trustee will be appointed to investigate whether funds held in trust for employees were misappropriated. “1,000 people are about to lose their jobs and they’re not even going to be paid for work that they did,” the judge lamented.
CSSE failed to pay its employees and vendors for at least four weeks prior to its Chapter 11 filing. According to Engadget, the company had to secure a loan of $8 million to partially pay for its workers’ salaries and to be able to restore their medical benefits that haven’t been active since the middle of May.
In court documents, HPS, the company’s top lender, had alleged gross mismanagement by the company. But in a declaration supporting the company’s bankruptcy petition, CSSE Chairman and CEO Bill Rouhana Jr. claimed that the firm’s financial struggles were in part due to “refusals” by its lenders “to live up to their obligations, resulting in asserted defaults and/or contractual terminations across critical content and service providers.” On June 11th, Rouhana unilaterally dissolved the company’s board of directors, before officially stepping down as CEO on June 24th.
CSSE’s Acquisition of Redbox
Chicken Soup for the Soul Entertainment acquired the struggling Redbox business in August 2020, in a deal valued at $370 million. With the acquisition, CSSE assumed $359.9 million of Redbox’s debt.
Redbox reached its revenue peak in 2013 at $1.97 billion with more than 43,000 kiosks in the U.S. and Canada stocked with movies, TV shows, and video games. In 2019, however, it stopped renting out video games to focus on movie rentals and its on-demand streaming service.
CSSE is a subsidiary of Chicken Soup for the Soul LLC, which publishes the famous book series and produces pet food under the Chicken Soup for the Soul brand name. Aside from Redbox, Chicken Soup for the Soul Entertainment operated Crackle, Popcornflix, and the eponymous Chicken Soup for the Soul streaming service. It also produced, acquired, and distributed films and TV series through its Screen Media and Chicken Soup for the Soul TV Group subsidiaries.