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\”Redbox’s field service technicians thought they had seen it all. Stores had unplugged thousands of the company’s iconic red DVD rental kiosks. Payroll and expense reimbursements had been late. Several employees say their corporate gas cards have been declined. They had read article after article about companies suing Redbox and its corporate parent over unpaid bills. Some of them had dug into financial data, puzzling together an alarming picture of a company drowning in debt. Still, the email they got on a Tuesday in mid-June came as a shock.
“Please stop what you are doing and return home immediately,” the message read, adding: “You will be paid for the rest of the day.”
The sudden work stoppage initially appeared to be due to liability issues. Chicken Soup for the Soul Entertainment, which had acquired Redbox in August of 2022, had informed employees earlier that day that it had been dropped by its health insurance provider; Redbox management seemingly didn’t want to have uninsured workers in the field to service and repair the company’s kiosks.
However, a follow-up email revealed deeper concerns. “We have entered an unforeseen and unprecedented situation for our company,” a senior Redbox manager wrote. The email referenced Chicken Soup’s inability to service its massive debt, as well as its CEO’s sudden decision to push out the entire board of directors. “It is disrupting our day-to-day operation, and we are temporarily halting all field activity until we have clarity on our path forward,” the email added.
Management telling hundreds of employees to stop working out of an apparent frustration with a company’s leadership is unprecedented – but it wasn’t surprising to former employees we spoke to at Redbox. The company has been on a dizzying rollercoaster ride ever since getting acquired two years ago. After failing to pay numerous bills, Redbox and its owner have been sued over a dozen times by companies, including CVS, 7-Eleven, and NBCUniversal.
When asked about the numerous lawsuits, Chicken Soup for the Soul Entertainment’s corporate communications SVP, Peter Binazeski, told me in March that the company could not comment on ongoing litigation; the company did not respond to a number of follow-up questions about its legal and financial situation.
Attempts to settle with NBCUniversal failed after Chicken Soup missed a required $4 million payment, and Redbox is on the verge of having its entire car fleet repossessed.
So, how did things go so wrong for Redbox? I’ve spent months pouring over lawsuits, regulatory filings, and internal emails, as well as talking to a number of current and former Redbox employees, to find an answer to that question. Many of those conversations took on increasing urgency in June, when, in a matter of weeks, people’s worries shifted from wondering whether they’d have a job by the end of the year to whether there would be a paycheck by the end of the week. And when the paychecks finally stopped coming, employees realized that this may be the end for the last major company to still rent out DVDs.
And it could be: Chicken Soup for the Soul Entertainment filed for bankruptcy at the end of June.
Things actually appeared to be looking up when Redbox was acquired two years ago. Sure, Chicken Soup for the Soul Entertainment seemed like an odd company to make this move, but there was a plausible backstory here: after the self-help book publisher was sold by its founders in 2008, the company’s new owners began to diversify its revenue streams, adding digital media properties and lifestyle products like pet food. Chicken Soup acquired a bunch of companies over the following years, including the film distribution outlet Screen Media and the pioneering free streaming service Crackle. Chicken Soup’s leadership painted the addition of Redbox as the next step in its quest to build an entertainment media empire.
Building that empire on the back of DVD rentals is not as crazy as it sounds. Netflix shipped DVD rentals to customers for 25 years and used the proceeds from that perpetually shrinking but highly profitable business to become the global streaming juggernaut that it is today. Redbox, founded in 2002, had long been a similar powerhouse in the DVD space, with consumers renting more than 6 billion discs to date. Chicken Soup planned to follow Netflix’s playbook, with CEO Bill Rouhana telling The Verge’s David Pierce last year that Redbox’s kiosks “could be the cash flow machine that allowed us to build out our digital business over the next decade.”
“The first few months were decent,” acknowledged a Redbox employee who spoke to The Verge on the condition that we do not publish their name for fear of retaliation. But soon, warning signs started to pop up. Chicken Soup’s stock price tanked in early 2023 and never recovered. There were some irregularities with paychecks being late. Then, stores started to pull the plugs on kiosks.
“When 7-Eleven pulled our machines, that was huge,” recalled a second Redbox employee, also speaking on the condition of anonymity. “That was our first big [warning] sign.”
The convenience store chain had Redbox kiosks in front of its stores nationwide, and Redbox was contractually obligated to pay 7-Eleven a percentage of the fees it got from every single rental. A lawsuit filed by 7-Eleven in June alleges Redbox stopped paying those fees last spring. 7-Eleven terminated its contract with Redbox in August of 2023 and demanded that the company pick up its kiosks but says Redbox never did. As a result, 7-Eleven franchisees began to unplug the machines and tape credit card readers shut. Countless inoperable kiosks remain in front of 7-Eleven stores to this day.
7-Eleven wasn’t the only retailer that had a falling-out with Redbox. CVS alleged in a February lawsuit that Redbox stopped paying commissions in Q3 of 2022. Illinois-based chain Sheetz stopped getting payments at the end of 2022, according to its own lawsuit filed in February. Publix pulled all kiosks sometime last year. Kroger began telling customers last month that its Redbox kiosks would stop working soon, and Portland-based Hannaford said it wouldn’t offer access to Redbox anymore by mid-June.
Redbox has not commented publicly on the lawsuits.
Company employees were left in the dark about these rifts. “[We would] find out by working in the field, and there’s a big sign on there that says: ‘As of May 20th, this Redbox is gone,’” said the first employee. “And we’re like: ‘All right, somebody else is suing us.’”
Among the companies suing Redbox and its corporate parent is Automotive Rentals, Inc., or ARI, from which Redbox leases over 400 SUVs and other cars for its service technicians. ARI alleges in its lawsuit that Redbox stopped paying its monthly leasing fees last September; the company terminated its lease agreement with Redbox in March and finally sued in May, alleging that it was owed $7.8 million in unpaid bills.
In a legal filing, Chicken Soup’s lawyers acknowledged the failed payments, writing that “defendants do not dispute that they owe Plaintiffs money — though there is significant question about how much.” The filing goes on to state that the company had “every intention of making Plaintiffs whole” as soon as it raised the necessary financing to do so.
Redbox employees didn’t initially know about this dispute, either, but they realized something was wrong when they suddenly weren’t able to receive routine maintenance services from ARI anymore. “We couldn’t get anything done,” said the first employee. This included oil changes. “I drive a lot, almost a thousand miles a week,” the employee said. “I’m almost 20,000 miles overdue.”
“There’s people who are 18,000 miles over getting [their] oil change done because [the company] can’t pay for it,” said the second employee. The problem apparently became so acute this spring that some employees were told they should just go out, buy some motor oil, and top off their cars themselves.
“I’m not popping that hood,” said the first employee. “I am not putting new oil in old oil. That is a no.”
It’s easy to dismiss Redbox as a relic of a bygone era. A company that’s survived long past its prime. The kiosk version of Blockbuster, destined to fail sooner rather than later.
Well before the Chicken Soup acquisition, Redbox leadership realized that times were changing, with people transitioning from physical media to streaming. “Everyone knew\”