Paramount says kiosk rentals don't hurt sales, extends deal with Redbox
Setting up a stark division between the Hollywood studios over how to deal with $1-per-night kiosk rentals, Paramount Pictures has agreed to provide its movies to Redbox on the same day they go on sale.
The move comes soon after Warner Bros, Universal Pictures and 20th Century Fox all signed deals with Redbox to block rentals of their DVDs until 28 days after they go on sale. The studios have argued that discount kiosk rentals hurt sales and ultimately depress their home entertainment revenue.
However, Viacom Inc.'s Paramount saw things differently. Over the last 10 months, the studio has experimented with numerous delays, or "windows." It also has studied whether sales vary based on a movie's genre and box office performance."The bottom line was that there were two conclusions we came to," Dennis Maguire, president of Paramount Home Entertainment, said in an interview. "There hasn't been a cannibalization of DVD sales from Redbox, and that Redbox was allowing us to expand our business and ultimately make more money than if there were windows."
Technically, Paramount is now moving forward on a deal it signed last August but was allowed to exit after the test period concluded last month. It will provide its films to Redbox the same day they go on sale through the end of 2014 and receive a percentage of revenue from the rentals, as well as a guaranteed amount of space in each Redbox kiosk for its DVDs. Redbox estimated that it will pay Paramount $575 million over the life of the agreement.
Sony Pictures previously signed long-term deals to provide its DVDs "day-and-date" to Redbox as well, while Walt Disney Studios offers its movies to Redbox without a formal arrangement. Tuesday's deal with Paramount means that the six major studios are essentially split evenly in their views on working with Redbox.
Fox, Universal and Warner Bros. have signed deals with subscription DVD service Netflix instituting identical 28-day restrictions on rentals of new DVDs. Maguire said the details of any new deal his studio signs with Netflix may be different, but that his philosophical approach will remain the same."Those people who want to rent are going to figure out ways to rent," he said, "and us restricting them from renting isn't going to turn it into a purchase."
-- Ben Fritz