Greenwich-based Chicken Soup for the Soul, which owns Redbox, declares bankruptcy

Two years after it made a big bet on Redbox to distribute its films, Chicken Soup for the Soul is bankrupt with millions of dollars owed to major studios like NBCUniversal, Sony Pictures and Lionsgate Entertainment.

Chicken Soup for the Soul Entertainment has its headquarters in Greenwich, with the company founded in 1993 as a publisher of inspirational books and later launching an entertainment division that would expand into video production and premium pet food under the Chicken Soup for the Soul brand. Big Y supermarkets stocks Chicken Soup for the Soul pet food in Connecticut.

A Chicken Soup for the Soul Entertainment spokesperson told CT Insider on Monday morning the company had no comment beyond court filings.

In August 2022, Chicken Soup for the Soul Entertainment took on nearly $360 million in debt in acquiring Redbox, giving it a network of what numbers today about 27,000 DVD kiosks that have long been ubiquitous in mass retail stores, and another streaming platform in addition to its nameplate video streaming service, Crackle which it acquired in 2019 from Sony Pictures Television, and Popcornflix.

Chicken Soup for the Soul Entertainment reported having just under 1,200 employees at the end of last year.

Entering April, Chicken Soup for the Soul Entertainment was carrying $970 million in debt against assets of $414 million. Losses totaled nearly $53 million in the first quarter of this year. The company had already flagged for investors the "going concern" warning of the possibility of a bankruptcy, in filings with the U.S. Securities & Exchange Commission.

Along with what it describes as "undisclosed preacquisition issues within Redbox", Chicken Soup for the Soul blames the bankruptcy on fewer new titles as a result of the pandemic and then industry labor stoppages, as described in SEC filings. As its cash flow crimped hindering its ability to pay for new titles, studios began restricting access to them, the company added.

In March, the Nasdaq sent a notice of intent to de-list Chicken Soup for the Soul Entertainment stock, with the company appealing in May. Shares were down by nearly half after the opening bell Monday to 11 cents, giving the company a market capitalization of less than $4 million. Shares had peaked above $42 in June 2021 before going into an extended slide.

In a court document filed Monday, a lender called HPS Investment Partners which financed the Redbox deal filed notice that it might seek to have the Chapter 11 bankruptcy restructuring converted to a Chapter 7 dissolution of the company, criticizing what it called "gross mismanagement and self-dealing" by former CEO  of Bill Rouhana Jr. after the jettisoning of a strategic review committee in the second week of June.

In an interview last fall on The Verge's podcast called The Vergecast, Rouhana described what led him to approach Redbox about a combination with Chicken Soup for the Soul Entertainment.

"Let's start with the brand and the very-loyal customer base spread out across the country, that probably hadn't fully migrated to the digital world for a variety of reasons — not the least of which is some places they don't have bandwidth that is enough to be able to download movies and watch them without a circle of death," Rouhana told The Vergecast. "In some cases, they're just late adopters. In other cases, they can't afford ... the kind of internet that's required."

Rouhana added that Redbox had 42 million people enrolled in its loyalty programs at the time of the deal, giving him hope at the time that the kiosk network "if handled correctly ... could be the cash-flow machine that would allow us to build our digital business out," in his words.

Under the original Chicken Soup for the Soul publishing label, the company has continued to churn out books, including a release scheduled for mid-July called "Just Say Yes — 101 Stories about Stepping Outside Your Comfort Zone" which lists as author Rouhana's spouse Amy Newmark who long was publisher-in-chief for Chicken Soup for the Soul.

Redbox was founded in 2002 under McDonald's as the fast-food giant was investing in potential side businesses, then sold to Coinstar and owned for a period after that by Apollo before the 2017 sale to Chicken Soup for the Soul. Over more than two decades, Redbox has leased some six billion DVDs.