Moviegoing in the digital age has claimed another casualty in the long-running battle for audience control.
Redbox, the once-beloved movie rental kiosk and rival to video store Blockbuster, is closing after its parent company filed for bankruptcy.
Chicken Soup for the Soul Entertainment (CSSE) changed its Chapter 11 bankruptcy filing to a Chapter 7 liquidation on Wednesday because lenders did not want to continue to take on the risk of lending to a failing business. The Wall Street Journal reported. on wednesday.
Redbox to close 24,000 rental kiosks as it moves to liquidate assets.
At its peak in 2013, Redbox had annual sales of $1.97 billion and once operated 43,000 kiosks across the United States and Canada.
According to the media report, the lawsuit was filed against the company’s largest lender, HPS Investment Partners, accusing it of serious mismanagement, including missing a payroll payment last month, which resulted in employees losing their health care benefits.
The case is being heard by U.S. Bankruptcy Court Judge Thomas Horan of the District of Delaware.
“We have no way to continue paying our employees or pay our bills,” Horan said in granting the company’s request to move forward with liquidation proceedings.
“Based on the allegations we have heard, it is important that a Chapter 7 receiver is appointed and conducts a proper investigation into the company,” Horan added.
The liquidation of the entertainment company will result in all 1,033 employees losing their jobs, and the employees will not receive any severance or long-term benefits.
“1,000 people will lose their jobs and not even be paid for the work they did,” Horan shouted.
Hoping to return to pre-pandemic numbers, CSSE acquired Redbox in a $375 million acquisition deal in 2022, but also took on about $360 million in debt.
The capacity to serve Redbox was “based on a partial return to pre-COVID levels of the number and frequency of theatrical releases available on the kiosk network,” Chairman and CEO William Rouhana said. According to Variety.
In its Chapter 11 reorganization filing on June 28, CSSE listed total liabilities of $970 million and consolidated assets of $414 million as of March 31, 2024. Variety reported.
The company still owes money to Walmart and Walgreens, where its kiosks were installed, as well as media companies such as Warner Bros. Home Entertainment and Sony Pictures Television.
Other creditors listed in the filing were Universal Studios Home Entertainment, Paramount Pictures, Lionsgate, BBC Studios Americas and Vizio.
Rouhana, who owns nearly 80% of the shares, unilaterally dissolved the company’s board of directors, excluding himself, before stepping down as CEO on June 24.
Following the bankruptcy filing on June 28, the board of directors was reconstituted in hopes of finding lenders to fund the sale process.
Chicken Soup for the Soul Entertainment is a subsidiary of Chicken Soup for the Soul LLC and is not included in the bankruptcy proceedings.
