As Hollywood lines up for and against Redbox, Paramount has decided to split the difference
The Viacom-owned studio has signed a first-of-its-kind trial deal with the $1-per-night DVD rental company, making its titles available through the end of the year. For the next four months, Paramount will study the effect on its total home-entertainment revenue, including any decrease in sales in Wal-Mart stores that house a Redbox kiosk and also sell DVDs.
Under the terms of the deal, Paramount will at the end of the year have the option to trigger a five-year agreement with Redbox similar to ones recently made with Sony Pictures and Lions Gate. The estimated value of the agreement is $575 million, substantially more than the $460 million Redbox's parent company, Coinstar Inc., estimated it will pay Sony Pictures over a five-year period.
Paramount's deal is understood to give the studio a revenue share on rentals, whereas Sony and Lions Gate are both selling their discs wholesale to the Redbox.
The trial program puts Paramount in a unique position among the major studios, as all the rest have either agreed to work with the company or are firmly against letting it rent their movies in the first month after the films go on sale. Sony and Lions Gate both have formal deals with Redbox, and Walt Disney Studios allows its wholesalers to sell discs to be rented in kiosks. Universal Pictures, Twentieth Century Fox and Warner Bros. have all attempted to restrict when Redbox can offer their movies, ranging from 28 to 45 days after launch. All three are now defending themselves against lawsuits as a result.
"There has been a lot of debate in the industry about the impact Redbox is having and will have, and we felt the best way to make a decision is by getting the information," said Paramount Vice Chairman Rob Moore. "Then we can make an informed decision based on what we will have learned over the next four months."
Moore said he hasn't reached any "definitive conclusions" as to what steps he will take if the data show that Redbox rentals do in fact reduce overall revenue. If the studio attempts to impose a window on kiosk rentals like Fox, Warner and Universal, it will undoubtedly also find itself on the receiving end of a lawsuit. ... [MORE]
