Chicken Soup for the Soul Entertainment, the parent company to Redbox, has filed for Chapter 11 bankruptcy protection, they told employees over the weekend. The company’s cash flow issues became a full-blown crisis recently, when reports emerged that the company was unable to make payroll, and that they had failed to make insurance payments, thus defaulting on their responsibilities to their employees and leaving workers without healthcare. This comes as other reports suggested that payments to studios were in arrears, leading to Redbox kiosks that were partially empty, or filled with Chicken Soup for the Soul exclusives that don’t cost the company anything.
Videos by ComicBook.com
Chapter 11 is a type of bankruptcy that allows the debtor to restructure their debts and assets, in the hopes of staying in business and making structured payments to creditors over time. Chicken Soup for the Soul hopes to recuperate from their currently cash crunch and remain in business.
“Overnight we filed for Chapter 11 bankruptcy protection,” said a message to employees (via Deadline). “In connection with the filing, we have applied for approval of a debtor in possession [DIP] loan. Upon court approval, we expect payroll to be funded early in the week and funding for this upcoming week’s payroll to also be secured. We also expect to have the funds to reinstate medical benefits back to May 14, 2024 and going forward. We will provide regular updates.”
According to an SEC filing in June, Chicken Soup for the Soul Entertainment said that its losses in 2023 were over $600 million, up from $111 million the year before. That’s obviously an enormous jump, but roughly in line with the hundreds of millions many of the major streaming video companies are losing annually. In addition to DVD rental kiosks, Redbox has been running a streaming platform since December 2017.
Redbox, originally a competitor to traditional video stores and early Netflix, places rental vending machines on the property of popular retailers. The company spun out of a McDonald’s initiative to sell a handful of items through vending machines, which started in the early 2000s. By 2003, McDonald’s had given up on the idea, and one of their executives thought to use the vending machines for DVDs and video games. In 2005, Redbox was bought up by Coinstar.
As the home video market shrank throughout the 2000s and 2010s, Coinstar eventually sold Redbox off to Apollo Global Management in 2016, who in turn sold it to Chicken Soup for the Soul in 2022. Redbox was the last in a series of big investments Chicken Soup for the Soul made after going public in 2017. The brand spun out of the popular series of self-help books of the same name. Besides Redbox, Chicken Soup for the Soul had taken over Crackle, the streaming service formerly owned by Sony, and 1091 Pictures. When Netflix closed down their DVD-by-mail business last year, Redbox said that they had tried to acquire it.
Delaware’s bankruptcy court will oversee the Chapter 11 filing. Under Chapter 11, “secured creditors” like banks will be paid first, followed by unsecured creditors including vendors. The company’s $970 million debt covers creditors including Universal Studios, Sony Pictures, Walmart, Warner Bros., and Paramount.
Walmart is an interesting inclusion, because earlier this year, users noticed that Redbox kiosks had been moved out of Walmart locations and relocated elsewhere. It now seems like that was less a strategic choices and more of a necessary evil.
