Paramount Re-Ups With Redbox

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Despite a recent study that concluded Redbox’s low-cost DVD rentals are destroying the entertainment industry, Paramount Home Entertainment  has extended its trial period with the DVD rental kiosk company. With the extension, Paramount — a division of Viacom — has agreed to make new release titles available for another six months while it evaluates Redbox’s business.

The original agreement, which was set to conclude at the end of December, offered new releases to Redbox in exchange for data about rental trends at different locations. In addition, Redbox promised that all Paramount DVDs would be destroyed after being removed from the kiosks, ensuring that they would not end up on the secondary market and compete against new DVD sales.

The extension suggests that Paramount hasn’t concluded its study of Redbox’s impact on its overall DVD business — otherwise it could choose to exercise an option to fully commit to Redbox through 2014 in a rev-share deal that is estimated to be worth $575 million. Instead, with the new extension the companies have agreed to continue under existing terms until June 2010, at which point Paramount will have the right to extend the option through December 2014.

While Paramount is taking a cautious approach to figuring out Redbox’s effect on DVD sales, other studios are picking sides over whether or not to work with the rental firm. Sony, Disney and Lionsgate have agreed to deals with Redbox, while Warner Bros. (TWX), Universal and Fox are currently stuck in legal battles with the kiosk company.

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