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Redbox Gets Paramount on Board; What's Next for Hollywood's DVD Battle

Viacom's Paramount just announced a partnership with DVD-rental company Redbox, becoming the third studio to make a deal with Coinstar's company that rents $1 DVDs through 17,000 kiosks around the country. This is far more than a simple DVD distribution deal, this is Paramount taking sides in what's become a pitched battle in Hollywood. The question now is which side Disney comes down on, it's one of the last players who hasn't picked sides.

Redbox is suing General Electric's Universal Studios, News Corp's 20th Century Fox and Time Warner'sWarner Brothers because they're refusing to deliver their DVDs for Redbox to rent until several weeks after those DVDs have gone on sale. They're concerned Redbox's $1 price point is undercutting their chances of selling DVDs and that Redbox's business of selling used DVDs is really hurting their business. On the other end of the equation are Sony and Lionsgate who struck deals with Redbox, giving the rental company access to their DVDs in exchange for presumably rich deals and the promise that Redbox wouldn't sell used DVDs at cheap prices.
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Paramount Home Entertainment is taking a cautious approach: They've agreed only to a trial deal through the end of 2009, and as part of the deal Paramount gets to see detailed information about how Paramount movies are consumed through Redbox. If Paramount is happy with the program the studio can extend the deal to 2014. And as part of the deal Redbox will destroy old movies instead of selling them, similar to the arrangement Sony struck.

Redbox wants to make it worth it for the studios to collaborate with them, and they'll take whoever fights them to court. In the current battle lines the anti-Redbox camp has more DVDs in its stable, even with Paramount on Redbox's side. Now all eyes are on Disney and which side Mickey Mouse picks.

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