Redbox Is in Massive Trouble
Redbox, once a staple in the American entertainment landscape, is now teetering on the brink of collapse. The DVD rental kiosk company and its parent corporation, Chicken Soup for the Soul Entertainment (CSSE), are facing an unprecedented financial crisis that threatens its existence.
The company’s troubles have manifested in alarming ways. Employees have not received paychecks for nearly a week, medical benefits have been suspended since mid-May, and the company is grappling with mounting legal judgments, according to Deadline. These issues paint a grim picture of a once-thriving business now struggling to stay afloat.
At the heart of Redbox‘s troubles lies considerable challenges. The decline of physical media rentals, the burden of acquisition debt, industry-wide disruptions, and apparent mismanagement have all contributed to the company’s dire situation. The 2022 merger between CSSE and Redbox, initially seen as a bold strategic move, has instead become a financial albatross, saddling the company with $325 million in debt, reports The Verge.
The financial toll is staggering. CSSE’s latest SEC filing revealed net losses ballooning to $636.6 million in 2023, up from $111.2 million the previous year, per Deadline. The company has admitted that without additional financing, it may need to “diminish or halt operations and seek protection under applicable bankruptcy laws.”
The market’s response has been brutal. CSSE’s stock, which traded above $40 per share just three years ago, recently closed at a mere 21 cents, putting the company at risk of being delisted from the Nasdaq.
Legal troubles are further compounding Redbox’s woes. A Los Angeles court recently entered a $16.7 million judgment against the company in favor of NBCUniversal for unpaid royalties. This is just one of many lawsuits the company faces from vendors and filmmakers over withheld fees. And in a surprising twist, CSSE recently removed its entire board of directors, except for CEO Bill Rouhana, reports the outlet.
The company’s 1,194 employees face an uncertain future, grappling with missed paychecks, suspended benefits, and the looming threat of job losses. Internal communications reveal a workforce in turmoil, with executives attempting to rally morale in the face of mounting challenges.
In a memo to employees obtained by Deadline, Redbox SVP Jeff Jopa acknowledged the dire situation: “Our company is in a very painful period of transition. We are temporarily stuck in this moment of pain and uncertainty. It’s scary. It feels unfair. If you’re running out of hope, it is understandable. If you’re frustrated or angry, I get it. We are expecting resolution in the coming days while not fully knowing what that looks like.”
Despite the challenges, Jopa attempted to rally his team: “I am (still) proud to be part of Redbox and the privilege to work with you. I ask that when we hopefully get to brighter days ahead, we move forward as a team and focus on the positive opportunities and business wins to come. I am here to support you and your leaders in any way you need. As always, thank you for who you are and what you do.”
CEO Bill Rouhana also addressed the payroll issues in an email to employees, acknowledging the strain on the workforce: “This has caused incredible frustration and anxiety,” Rouhana wrote, adding that he and the management team have been “working nonstop” to close a financing arrangement. He expressed hope to fund the delinquent payroll by Monday, promising an update by Friday, with benefits “expected” to be reinstated in two weeks.
Redbox has attempted to pivot its business model, focusing on its service capabilities and deploying workers to maintain Amazon Lockers and Pokemon retail vending machines. Jopa explained in a May email to employees, per Deadline, “Redbox should be thought of as a service client. We will move forward and build on our expertise and amazing people. We have a myriad of differentiated offerings that other service providers can’t touch.”
CSSE has also made attempts to right the ship. Earlier this spring, the company announced an agreement that would allow it to raise $175 million in additional working capital from two financing parties. This deal also included a plan to make a $75 million loan prepayment under the company’s principal credit facility.
However, the recent missed payment to NBCUniversal and the ongoing payroll and benefits issues suggest that this financial maneuvering may have fallen short. The company’s ability to secure additional funding in the face of its deteriorating financial position remains a critical question.
However, these efforts may be too little, too late. The company now faces the potential repossession of over 400 leased vehicles used by its field staff, a development that its own attorneys warn could force Redbox to “terminate hundreds of jobs and would be put out of business.”
