How Chicken Soup is trying to save Redbox (and avoid bankruptcy)

Chicken Soup for the Soul Entertainment, the parent company of Redbox and Crackle as well as a bunch of other streaming ventures, continues to be in deep financial trouble: Chicken Soup incurred losses of $636.6 million last year, leading to a deficit of $884.3 million, it revealed in its 2023 annual report a few days ago.

However, Chicken Soup executives believe they have found a way out: The company struck a deal with its primary lender this month that gives it two months of reprieve, according to the filing. During those two months, Chicken Soup plans to strike a deal to sublicense some of its business for $50 million, as well as find a company willing to invest $125 million into the Redbox brand via a new loan and an equipment lease. Only if and when those new arrangements are in place, Chicken Soup will get another reprieve until later this summer.

This is just the latest chapter in a saga that began when Chicken Soup for the Soul Entertainment acquired debt-ridden Redbox in 2022 with the hopes that Redbox’s DVD rental business would rebound post-COVID. That clearly didn’t happen:

• Redbox was operating 36,000 DVD kiosks at the time of the acquisition. That number is now down to 27,800 kiosks, according to the company’s annual report.

• Chicken Soup told investors last May that it expected its 2023 revenue to be $550 million. Its actual revenue for the year was just $294 million.

• Chicken Soup and Redbox are behind on many of their bills, leading to a wave of lawsuits from retailers and other business partners. I documented lawsuits from CVS, Universal, Sheetz and others in my recent story about Redbox’s demise, but the annual report mentions that the company is also being sued by Sony Pictures and the BBC.

• The company’s many unpaid bills are increasingly threatening its day-to-day operations: “At December 31, 2023, the Company is in default of its primary office leases, distribution center lease and car fleet lease, providing […] lessors the ability to evict the Company from its premises or repossess the vehicles,” the annual report finds.

“Substantial doubt exists regarding our ability to continue as a going concern and we are in default on various debt and leases agreements,” the company warned in that report. “If we are unable to renegotiate our primary credit facility and secure financing from new sources, we may be required to seek relief and protections under United States federal bankruptcy laws.”

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Photo CC-BY Mike Mozart.