So here’s an interesting tidbit: Rather than follow other Hollywood studios by restricting Redbox (s CSTR) from offering new release DVDs until a month after they’re released, Paramount Pictures (s VIA) has decided to make its movies available on the same day and date that they’re available for sale. But the reason it has decided to buck the Hollywood trend is even more interesting.
Paramount struck a revenue-sharing license agreement with Redbox that will let the kiosk company continue offering new release DVD rentals for $1 a piece. That deal is a stark contrast to other agreements Redbox has struck with 20th Century Fox, Universal Studios and Warner Bros. that add a period of 28 days before new releases can be made available in Redbox kiosks.
So why didn’t Paramount agree to its own four-week windowing deal? Well, the multi-year license agreement between Paramount and Redbox comes after the movie studio completed a ten-month study of the low-price DVD rental firm’s effect on new release sales. Paramount was the only major studio to conduct such a detailed analysis, using information that it received through a deal which involved data about rental trends at different locations.
And what Paramount found was that Redbox’s $1 DVD rentals did not hurt its bottom line. In fact, the studio issued the following statement along with the press release:
“After analyzing the data from our test period we have concluded that redbox day-and-date rental activity has had minimal impact on our DVD sales,” said Dennis Maguire, Worldwide President of Paramount Home Entertainment. “By granting redbox day-and-date availability we are allowing the consumer a choice of how to consume our movies while maximizing the profitability of our releases in the home entertainment window. We are looking forward to continuing a productive and mutually beneficial relationship with redbox.”
That conclusion may come as a shock to many in Hollywood who have warned that Redbox’s low-cost DVD rentals would eat into new release sales and ultimately destroy the entertainment industry. But with at least one studio in Redbox’s corner, others in Hollywood might have to rethink their position.
Related content on GigaOM Pro: Redbox Success Means Netflix Should Consider Kiosks (subscription required)