The parent company of Redbox has filed bankruptcy, nearly two years after its ill-fated merger with the deeply indebted DVD kiosk operator.
Chicken Soup for the Soul Entertainment, which gets its name from the best-selling self-help book series, on June 28 filed for Chapter 11 protection in Delaware, listing assets and liabilities of at least $500 million each.
In the summer of 2022, Chicken Soup acquired Redbox and assumed a total of nearly $360 million in debt. Through the merger, the company inherited a nationwide network of approximately 27,000 red kiosks in front of supermarkets and convenience stores, and a third streaming platform in addition to its namesake video-streaming service and Crackle.
However, the acquisition didn’t help improve the company’s finance. By the end of the first quarter of 2024, Chicken Soup reported a net loss of $53 million, with an accumulated deficit of $937 million. It also stopped paying many of its bills, straining relationships with the company’s creditors, including content providers.
In a statement filed with the U.S. Securities and Exchange Commission (SEC), Chicken Soup said it expected to be able to keep its debt under control, on the premise that Americans’ demand for physical kiosk rentals would return to pre-COVID levels. The post-pandemic movie rentals did rebound somewhat, but weren’t strong enough to generate cash flows and working capital to operate the business.
Instead, as the flow of theatrical releases began to increase following COVID, Chicken Soup found itself unable to pay for all the movies that were offered to it by their providers.
“The company has received an increasing number of termination and non-renewal notices from content suppliers and other service providers, including receiving default notices under certain of its leases and certain of its lenders,” Chicken Soup told the SEC in April. “These financing partners have the ability to evict us from facilities, repossess vehicles or call their debt, but none have done so to date.”
In early June, the company defaulted on its debt, but didn’t immediately seek bankruptcy protection. The financial fallout did, however, prompted chairman and chief executive William Rouhana, Jr. to fire the company’s entire board of directors other than himself.
This happened as Redbox was hit by court order after missing an initial payment as a part of its settlement with Universal over unpaid DVD and online rental royalties. The settlement allowed Redbox to pay the entire $16.7 million over three installments, with the first billed at $4 million by June 10.
On June 20, a Los Angeles court ruled against the company in favor of Universal, saying that RedBox must repay the $16.7 million altogether.
