Setting up opposing camps among the Hollywood studios over $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 DVDs until 28 days after they are released. The studios have argued that discount kiosk rentals hamper DVD sales and cut into home video revenue.
However, Viacom Inc.'s Paramount views things differently. Over the last 10 months, the studio has experimented with numerous delays, or "windows," of DVDs to Redbox to weigh its effect on sales.
"There were two conclusions we came to," said Dennis Maguire, president of Paramount Home Entertainment. "There hasn't been a cannibalization of DVD sales from Redbox, and Redbox was allowing us to expand our business and ultimately make more money" than if the studio held back its DVDs to Redbox for a period of time.
Technically, Paramount is 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 would 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, and Disney 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."
DVD and home video rentals have helped to support the movie business for years. But the downturn in DVD sales has undercut revenues, leading the studios to evaluate longtime practices.