Redbox, Paramount extend DVD street date deal
PHYSICAL: Trial agreement goes through June 2010
By Danny King -- Video Business, 12/14/2009
DEC. 14 | PHYSICAL: Paramount Home Entertainment extended its trial direct revenue-sharing agreement with Redbox through June 2010, lengthening a deal it reached in late August to have its DVDs available for rental in Redbox kiosks on street date.
Paramount has extended its revenue-sharing deal with Redbox to June 2010.
The agreement, whose trial period was set to expire at year end, continues to give Paramount an option to extend the deal through 2014, with an opt-out clause at the end of 2011, Redbox said in a statement today.
With Sony Pictures Home Entertainment, Paramount, Lionsgate and Walt Disney Studios Home Entertainment, Redbox has titles on street date from studios that account for about 40% of the U.S. DVD rental market during the first half of the year, according to Rentrak.
Meanwhile, Warner Home Video, 20th Century Fox Home Entertainment and Universal Studios Home Entertainment have taken issue with Redbox’s $1 a night rental fee by trying to impose a delayed window of 30 days or more on kiosk rentals and are being sued by Redbox. Warner, Fox and Universal together also account for about 40% of the rental market.
“We are enjoying our business relationship with Redbox and the data from our initial trial period has been encouraging,” said Dennis Maguire, worldwide president of Paramount Home Entertainment, in today’s statement. “We are extending the time period that we have to exercise our option in order to give us more time to assess the long-term potential of this business relationship.”
As part of the deal, Redbox is destroying used rental inventory, rather than redistributing it for eventual sale to consumers. Cheap used DVDs are a huge sticking point with the studios because they compete with new DVD sales. Some studios also believe that Redbox rentals provided by kiosks cannibalize new DVD sales, leading to a movement by some studios to institute a later window on kiosk rentals.
As part of the August agreement, Redbox was to pay Paramount about $575 million over the five-year term, with a guaranteed market share of 18.5% for Paramount titles in Redbox kiosks, almost double the 10% share the studio has in the overall rental market. If the deal is extended through 2014, it would potentially represent 25% more revenue than Redbox’s previously largest contract to date—a $460 million, five-year pact that gives Sony 19.9% share in Redbox kiosks.
Last week, Redbox parent Coinstar said it had deployed 22,210 DVD kiosks, surpassing the goal it set for 2009. Redbox has averaged 900 new machines per month over the past six months, Coinstar said.
