The archive · Consumer Apps · Financial decision · 2002–2024
CSSE bought Redbox for $370M to fund streaming with DVD cash; 24,000 kiosks shut in 2024
CSSE bought Redbox's kiosks as a 'cash flow machine' for its streamers; two years later, unpaid bills and Chapter 7 killed both companies.
Redbox · Chicken Soup for the Soul Entertainment
What the business is
Redbox: 24,000 DVD-rental kiosks plus streaming and on-demand services; CSSE: ad-supported streamers (Crackle, Popcornflix) and film distribution.
How it started
Gregg Kaplan, a McDonald's executive, repurposed the chain's 'Project 361' kiosks from groceries to DVD rentals (tested in Denver, 2004). Redbox passed Blockbuster as America's biggest rental chain in 2007, and at its 2013 peak rented 772.9 million discs for $1.97B in revenue.
What happened
Owners rotated: McDonald's, then Coinstar (2005–09), Apollo Global (2016), then a SPAC listing in Oct 2021. In Aug 2022 CSSE completed an all-stock deal worth ~$370M, betting Redbox's kiosk cash would fund its FAST-channel expansion. Instead kiosk revenue kept falling; by 2023 CSSE stopped paying kiosk commissions — 7-Eleven terminated its contract (Aug 2023), CVS, Sheetz and ARI sued in early 2024, Universal sued for $17M in licensing fees, and Redbox missed a required $4M payment it could not afford to miss.
How it ended up
CSSE missed four weeks of payroll, filed Chapter 11 on 29 June 2024, and on 10 July a Delaware bankruptcy judge converted the case to Chapter 7 liquidation: 'There is no means to continue to pay employees, to pay any bills.' All ~24,000 Redbox kiosks and streaming services shut down; all 1,033 employees lost their jobs without severance or their final pay.
Background
Redbox was born in 2002 inside McDonald's as 'Project 361': Gregg Kaplan took the burger chain's unused kiosks, filled them with DVDs, and placed them on supermarket sidewalks for about a dollar a night with return-anywhere convenience. It overtook Blockbuster as America's largest rental chain in 2007, and at its 2013 peak rented 772.9 million discs for $1.97B in revenue — more than half of all US DVD rentals.
Streaming then bled it for a decade: revenue fell 20% in 2019, 36% in 2020 and over 50% in 2021 as owners rotated from Coinstar to Apollo to a 2021 SPAC listing. In August 2022 Chicken Soup for the Soul Entertainment — owner of streamers Crackle and Popcornflix — completed an all-stock acquisition worth about $370M, betting Redbox's kiosks would be, in CEO Bill Rouhana's words, 'the cash flow machine that allowed us to build out our digital business.'
The machine stalled instead. CSSE's repayments were 'predicated on a partial return to pre-COVID' theatrical releases, which never came. Kiosk commissions went unpaid: 7-Eleven pulled its machines in 2023, CVS, Sheetz, Universal and ARI sued in early 2024, and the parent missed payroll for four weeks before filing Chapter 11 on 29 June 2024. On 10 July a Delaware judge converted the case to Chapter 7 — '1,000 people are about to lose their jobs and they're not even going to be paid for work that they did' — and all 24,000 kiosks and streaming services were shut down.
What has to be true
- The deal assumed a recovery that never came: Rouhana's own declaration said CSSE could only service the Redbox debt if kiosk demand returned to a third of 2019 levels — it did not.
- The $370M deal loaded CSSE with debt the kiosks had to carry; as revenue slid, the parent admitted it could not 'service its massive debt', and the streaming build-out burned the cash that did arrive.
- The kiosk network was a trust chain: when commissions stopped, partner stores (7-Eleven, CVS, Sheetz, Publix, Kroger) unplugged machines or sued, so the distribution base died before the company did.
- Missing payroll was the death sentence: four weeks of unpaid wages pushed the judge to convert to Chapter 7 on 10 July 2024 and order a probe into whether employee trust funds were misappropriated.
What can be applied
Buying a shrinking cash cow works only while the cash covers the acquisition debt; if the decline accelerates, leverage eats the company, unpaid bills eat partners, and the machine stops at once.
Aftermath
The liquidation ended the DVD rental era in the US — Variety's analysis ran under the headline 'With Redbox's Demise, the DVD Rental Business Bottoms Out'. Thousands of kiosks were left standing outside stores with closing notices; removal and recycling firms such as CoolSys and The Junkluggers spent 2025 hauling them away, while hobbyists reverse-engineered kiosk software to keep units alive. A court-appointed trustee investigated CSSE's handling of employee trust funds, and all 1,033 employees lost their jobs without severance or their final pay.
Sources
- Why Redbox has been powering down
- RIP Redbox: DVD Kiosk-Rental Business Is Shutting Down With Parent's Bankruptcy Liquidation
- Redbox Is Now Officially Part of Chicken Soup for the Soul Entertainment After $370 Million Deal Closes
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