Disney is suing Redbox to stop it from selling digital download codes

Redbox may be best known for renting physical DVDs and Blu-rays, but The Wall Street Journal reports that the company is facing a lawsuit from Disney for selling digital download codes to the studio’s films. Redbox started the practice last month, offering customers the ability to purchase printouts of codes for movies like Rogue One: A Star Wars Story and Moana at its kiosks, with prices set far below digital retailers like iTunes or the Google Play Store.

“Redbox is selling our digital movie codes in blatant disregard of clear prohibitions against doing so,” the company said in a statement to Variety. “Their actions violate our contracts and copyrights, and we have filed this action to stop Redbox’s unauthorized conduct.”

Redbox’s kiosk business primarily revolves around renting physical copies of movies. The company has distribution deals in place with major studios like Warner Bros., 20th Century Fox, and Lionsgate that allow them to offer their films for rental soon after they’re released on home video. Disney, on the other hand, has no such deal in place, leaving Redbox to purchase retail copies of the studio’s titles. Disney is known for bundling digital download codes, like allowing customers to download a digital version of The Avengers after buying the Blu-ray, for example. Printouts of those codes are what Redbox is now selling directly to its customers, despite the fact that — as the Journal points out — retail copies feature language the specifies that digital codes are “not for sale or transfer.”

A spokesperson for Redbox told the Journal that “we feel very confident in our pro-consumer position,” but it’s not difficult to understand why Disney is seeking a legal remedy to the situation. Looking over the movie selections, there is a vast gap in price between Redbox and the digital retailers that carry Disney’s films. Buying a digital code for Pixar’s Inside Out runs $3.99 through Redbox, while buying a download of the movie from iTunes or Amazon costs $19.99. Guardians of the Galaxy Vol. 2 has the same retail price, yet the download code is only $7.99 when purchased at a Redbox kiosk. With the expansion of Disney’s Movies Anywhere digital locker service earlier this year, that essentially turns Redbox into a low-cost backdoor to movie ownership, allowing consumers to obtain a copy of a Disney movie that they can then download from any of the major digital retailers at a fraction of the price.

As part of the suit, Disney is asking for profits from the sales of the codes up to $150,000 per title, along with an injunction to prevent Redbox from selling the digital codes. As of this writing, however, they are still available for purchase.