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Paramount delays Redbox decision until June

December 14, 2009 |  6:00 am

Redbox23 Faced with a deadline to trigger or kill a five-year deal with the bete noire of half of Hollywood, Viacom's Paramount Pictures is kicking the can down the road.

The studio has extended through June its trial agreement with controversial $1-a-night DVD kiosk company Redbox Automated Retail, which was set to expire Dec. 31. Under the deal struck in August, Paramount was supposed to study this fall whether offering new releases through Redbox was hurting sales and then decide by the end of the year whether to trigger a five-year deal that was expected to generate $575 million for the studio. Paramount now has till June 30 to decide whether to initiate the deal, which still expires at the end of 2014.

In a statement, Paramount Home Entertainment President Dennis Maguire said that the data so far have been "encouraging" but that the studio wants "more time to assess the long-term potential of this business arrangement."

News Corp.'s 20th Century Fox, NBC Universal's Universal Pictures and Time Warner Inc.'s Warner Bros. are all in court trying to prevent Redbox from offering new releases for about a month,  unless and until they can negotiate better business terms. They say $1-a-night rentals of new releases undermine their business models by drawing consumers from higher-priced (and more profitable) rentals and purchases at a time when overall home entertainment revenue is falling. Redbox argues that it is generating new business and that its effect on sales is minimal.

Sony Pictures, Lions Gate and Summit Entertainment have all signed long-term deals guaranteeing availability of their movies to Redbox. Walt Disney Studios provides its movies without a formal arrangement. Paramount's decision is being closely watched, as it could indicate whether the major studios are generally united against Redbox.

Paramount has had two of the best-selling DVDs of the fall, "Transformers: Revenge of the Fallen" and "Star Trek." But maybe sales would have been even stronger if the movies weren't available on Redbox.

The studio has three DVDs expected out before June: "Paranormal Activity," "Up in the Air" and "The Lovely Bones." Waiting will give it time to assess the effect of Redbox on dramas and a low-budget horror flick. It has already had time to do so for summer action movies ("Trek," "Transformers" and "G.I. Joe: The Rise of Cobra") and comedies ("Imagine That" and "Dance Flick," both unsuccessful and released this fall).

It's also possible that in the next six months, Fox, Universal and Warner will resolve their litigation with Redbox, making Paramount's decision about whether to sign a long-term deal much simpler.

--Ben Fritz


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Photo credit: Elaine Thompson / Associated Press