Chicken Soup for the Soul Entertainment (CSSE) has filed for Chapter 11 bankruptcy protection, grappling with financial pressures exacerbated by its acquisition of Redbox in 2022.
The company faces debts totaling around $970 million against assets of $414 million, owing substantial amounts to major entities like Universal Studios, Sony Pictures, Walgreens, and Walmart. Despite efforts to diversify into streaming services, the future of Redbox’s 27,000 kiosks nationwide remains uncertain. The publishing arm of CSSE, known for its enduring inspirational books, continues independently amidst the financial turbulence, having published over 300 titles since its inception, resonating with readers worldwide.
In response to the bankruptcy filing, which followed the company’s failure to pay its employees for a week and obtain financing, Chicken Soup for the Soul has sought a debtor-in-possession loan of up to $100 million to sustain operations during the bankruptcy proceedings. This loan aims to stabilize payroll obligations and reinstate medical benefits for employees.
Financial woes have mounted for Chicken Soup for the Soul, exacerbated by missed payroll and mounting debt. The company owed significant sums to creditors, including $46 million to U.S. Bank and over $9 million each to Sony and BBC Studios. Delinquent rent payments to Walgreens and Walmart have added to the company’s financial strain, culminating in the Chapter 11 filing in Delaware.
The company’s diversified portfolio, which includes not just Redbox but also streaming brands like Crackle and Popcornflix, aimed to adapt to changing viewer preferences. Despite efforts to pivot toward digital platforms, the company struggled to offset the decline in DVD rentals, further hampered by contractual disputes and delayed payments to Hollywood studios.
Once ubiquitous in front of grocery stores and pharmacies, Redbox’s DVD rental kiosks, currently numbering over 27,000 nationwide, were once a convenient way for movie buffs to pick up the latest releases. However, as digital downloads and streaming platforms gained traction, the appeal of physical DVDs waned. The company’s acquisition of Redbox in 2022, valued at $357 million in stock and debt, now appears to have been ill-timed, burdening CSSE with substantial financial obligations.
This acquisition resulted in impairment charges, contributing to substantial losses for Chicken Soup for the Soul Entertainment, rising from $20 million in Q3 2022 to $433 million in 2023. Legal disputes, including unpaid royalties to NBCUniversal, further compounded its troubles.
The company sought to pivot toward streaming, leveraging Redbox’s Free Live TV FAST service offering nearly 170 channels. Despite these efforts, CSSE’s stock plummeted, prompting NASDAQ to consider delisting due to prolonged trading below $1. Recently, shares saw a brief surge from 15 cents to 43 cents before declining to 26 cents, starkly down from highs of $42 in June 2021 and $1.84 a year ago.
Prior to its financial downturn, CSSE had pursued expansion, acquiring stakes in Indian production company Locomotive Global and the TV/film assets of Sonar Entertainment in 2021. These moves, along with the launch of Halcyon TV’s scripted division, underscored its ambitious growth strategy before encountering severe financial setbacks.
Founded originally in 1993 by motivational speakers Jack Canfield and Mark Victor Hansen, Chicken Soup for the Soul Entertainment gained fame through its inspirational book series. Titles like “From Lemons to Lemonade” resonated widely, offering uplifting stories tailored for diverse audiences. Despite this success in publishing — having sold over 500 million copies globally — the company’s foray into entertainment, specifically through Redbox, has hit turbulent waters.
Under the leadership of William J. Rouhana Jr., who became CEO in 2008, the company attempted expansions beyond its core publishing business. These ventures included an ill-fated line of soups and the establishment of an entertainment division in 2016, which aimed to capitalize on the multimedia landscape. However, these efforts failed to stem the financial losses that have plagued the company, culminating in a reported net income loss of $636 million in 2023 alone, per a filing with the U.S. Securities and Exchange Commission.
After filing for bankruptcy, CSSE replaced Rouhana with Bart M. Schwartz as CEO. Additionally, Schwartz is one of three new board members, along with Josh Mandel and Steven Goldsmith.