After months of financial struggles, Redbox parent Chicken Soup for the Soul Entertainment has filed for Chapter 11 bankruptcy protection.
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The company relayed news of the Delaware court filing in a message to employees in the early hours of Saturday.
“Overnight we filed for Chapter 11 bankruptcy protection,” the message said. “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.”
Delinquent payroll and suspended benefits, first reported last week by Deadline , became the latest fire for the company to try to extinguish. It has been in financial distress over the past year in the wake of bringing aboard Redbox in a debt-heavy 2022 deal valued at $375 million. At the same time the transaction was being absorbed, the Hollywood studio pipeline was constricted by the dual strikes in 2023, only exacerbating the ongoing decline of physical disc rentals. A number of vendors and filmmakers had also gone unpaid, and some had filed lawsuits.
In an SEC filing earlier this month, the company said its net losses widened to $636.6 million in 2023 from $111.2 million in the prior year. The filing warned that bankruptcy was a potential outcome if the company failed to secure funding.
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The Redbox deal capped off a series of acquisitions following the company’s initial public offering in 2017 as a spinoff from the popular Chicken Soup line of self-help books. The company scooped up streaming service Crackle from Sony and also took over 1091 Pictures, Screen Media and TV production outfit Sonar Entertainment. At one point, the company had built itself into one of the top players in free, ad-supported streaming, with Crackle, Popcornflix and an eponymous Chicken Soup outlet designed for more wholesome, female-skewing programming. The streaming momentum, which boosted the company’s stock past $40 in 2021, dissipated after Wall Street took a harsher view of the emerging business model and the complications of Redbox became apparent.
It will now be up to a Delaware bankruptcy court to determine how the company moves forward and whether it can come out on the other side. The media business has seen a number of Chapter 11 filings in the past couple of years as Covid added to an already daunting set of business challenges. Vice Media, Audacy and Regal Cinemas parent Cineworld are among those resorting to bankruptcy, with Cineworld managing to continue operating and emerge last year with many of its theater assets in operation.
Under the Chapter 11 setup, secured creditors like banks will be first in line to be paid, while unsecured creditors including vendors will be next. Unsecured creditors listed in the company’s bankruptcy filing include Universal Studios, Sony Pictures, Lionsgate, Walmart, Vizio, Warner Bros. and Paramount Pictures. Total debt is at $970 million, per the filing.
Shareholders are usually left holding the bag in Chapter 11 cases, though most investors have already fared poorly. CSSE’s beleaguered stock has already been in danger of being delisted by the Nasdaq. It closed Friday trading at 19 cents a share, down 7% for the day, giving the company a market value of just $6.3 million.
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