Redbox Older Chicken Soup for the Soul Tightens Its Belts as Movie Revenue Begins to Return; Executive bonuses delayed, some distribution deals renegotiated, but no layoffs planned

EXCLUSIVE: With important movie rental revenue finally coming back, Redbox and Crackle’s parent company, Chicken Soup for the Soul Entertainment, is taking steps to tighten the company’s belt.

The excitement in media and entertainment circles grew louder as Chicken Soup’s stock fell to a record low, bringing its market value to $55 million​​​​. It closed Tuesday at $2.60, half its level at the start of 2023 and well below the level above $14 when Redbox’s $375 million acquisition closed last August. The operating environment has obviously been grueling for all media companies over the past year, as stocks across the board have fallen and most players have been in cutback mode.

Multiple sources familiar with management’s mindset told Deadline that no layoffs are expected for the company, which runs a number of ad-supported streaming companies along with Redbox. Instead of staff cuts, however, executive bonuses normally paid in March were pushed back to the second quarter and select distribution deals for titles inherited as part of the Redbox deal were renegotiated. The company also just provided a $50 million drop from a stock purchase agreement to bolster its financial resources.

At a recent town hall meeting, CEO Bill Rouhana informed employees of plans to delay executive awards. The other major cut is the renegotiation of individual distribution agreements for select Redbox titles resulting from the acquisition. Before going public in late 2021 through a merger with dedicated procurement firm Seaport Global, Redbox significantly increased its original manufacturing output. When a new owner takes over – think another budget level, Warner Bros. Discovery – existing projects are reconsidered, or sometimes even scrapped, as part of contractual obligations. Big multi-picture packs as signed by Redbox in 2020 John Wick Producer Basil Iwanyk will not be affected by the withdrawal, sources said.

The company declined to comment on its recent activities, citing the federally mandated quiet period before its fourth quarter earnings report. CSSE will be one of the last companies to report results this earnings season and has not yet indicated when that will happen. SEC rules require numbers to be released within 90 days of the end of the previous quarter, meaning the company must be in the spotlight sometime before March 31.

As steps are taken, transactional rental income at Redbox is finally rolling back after the long battle with Covid, along with studios’ efforts to prioritize their own subscription streaming channels. The company saw strong sales increases in February and March, as did major theatrical titles in the fourth quarter Black Panther: Wakanda Forever And Puss in Boots: The Last Wish entered the rental window. Certain movie revenue numbers aren’t usually shared publicly, and most of the momentum will flow to the balance sheet in the current quarter, not last.

According to Digital Entertainment Group, the total rental market for physical and digital devices is significant and will reach $6.3 billion by 2022. As with theatrical performances, the size of the overall release list is directly related to revenue. Expectations for 2023 are a box office boom of more than 20%, fueled by more releases on schedule, and returns so far this year suggest a meaningful comeback story is taking shape.

Redbox, which operates 34,000 kiosks outside retail locations such as supermarkets and convenience stores, expects at least one major new release every week for the rest of 2023, a big improvement from the Covid shutdown. Still, there has been some turmoil since the acquisition, as it consisted almost entirely of Chicken Soup’s takeover of Redbox debt. While the decision to more than quadruple the company’s debt load unnerved many investors, as Rouhana himself admitted in an interview with Deadline last fall, no deals will be made anytime soon and debt repayments won’t begin until 2024. The aggressive increase in interest rates over the past year, which has contributed to bank failures and a slowdown in M&A activity in the economy, does not appear to pose a particular threat to the company in the near term.

Despite this, Chicken Soup announced last week that it had entered into a $50 million stock purchase agreement with Lincoln Park Capital Fund, a Chicago-based investment firm. The deal, known as the “backstop” financing arrangement, gives the company additional flexibility as it looks for film revenue to move the needle.

B. Riley analyst Eric Wold has long been a bull on Chicken Soup for the Soul stock and has a 12-month price target of $26 on the stock. He told Deadline that he remains bullish on the company’s prospects, although he acknowledged that the target price may need to be revised.

The inventory “is messed up because it’s not like you had good news” that rentals are presented as surprises at the box office cocaine bear, creed 3 And M3gan. While Redbox, like Kinos, is “still in an unknown state,” “I’m confident it will recover,” he added. Leading up to the 2019 pandemic, Wold said Redbox was earning $200 million a year in EBITDA. The retail price, with rentals as low as $2 a night, remains attractive to many consumers during times of inflation when much of the country lacks pay TV or broadband Internet.

As the movie wheels began to turn again, Hoendersop has not made much public comment since Rouhana appeared at an investor conference hosted by Needham & Co on January 11. Around 2023, he cited the return of cinemas as the first and “worrying” rate hikes as the last. When Martin asked him to pass on the best advice he’s ever received, he repeated a command from his father. “Take the extra minute to get it right,” Rouhana said. “He’s told me that so many times, I say it to myself now when I’m about to cut a corner.”