Blog Post

Paramount Tries Before it Buys into Redbox Model

RedboxLogoRedbox (s CSTR) has found itself at the center of a Hollywood war over the price of movie rentals, and up until now, sides have lined up either with the kiosk rental company (Sony (s SNE), Lionsgate) or against it (Universal (s GE), Warner Bros. (s TWX), Fox (s NWSA)). Paramount (s VIA) has chosen a third option — it’s entering into a trial through the end of the year with Redbox before it makes a final decision.

The deal will give Redbox access to new release Paramount movies as soon as they are released — a sticking point for those opposed to Redbox’s model. The LA Times reports that Paramount’s deal is a rev-share one, rather than an outright wholesale of discs to Redbox like Sony and Lionsgate do. Additionally, Paramount will get access to Redbox rental data of its movies, which the studio will use to determine the impact the $1 a night rental service has on its total home entertainment revenue.

If Paramount decides to fully commit to Redbox, it will be to 2014 and the deal is estimated to be worth $575 million.

Paramount’s move is so packed with common sense it almost makes you wonder why no one did it before. Universal, Fox and Warner Bros. all imposed delayed release windows against Redbox, which responded with lawsuits. Sometimes, things don’t have to be either/or, they can be both/and.

4 Responses to “Paramount Tries Before it Buys into Redbox Model”

  1. So far this debate has been centered around the impact that $1 pricing is having on packaged media, but I think that the implications of Redbox go significantly beyond that. It more or less caps VOD and digital downloads at around $3 a piece because people won’t pay outrageous amounts if they know that there is a less expensive versions out there.

    Hopefully, this leads to more titles hitting the web and an end the super high download rates (designed to discourage consumers from going digital) At the end of the day though, Paramount can look at Redbox’s data all they want, but if the pricing creates a floor on what they can charge, they are turning over a lot of power to Redbox.