Paramount scraps home entertainment tie-up

Published: October 22 2009

Paramount Pictures, the Hollywood studio owned by Viacom, has scrapped plans to combine parts of its home entertainment unit with a rival studio after agreeing to an improved deal with Technicolor, the DVD replication business owned by Thomson.

Brad Grey, the Paramount chairman, said the new deal to produce and distribute DVD and Blu-ray discs with Technicolor would save Paramount “tens of millions of dollars” each year.

DVDs were once the film industry’s main cash generator but sales have been tumbling across the industry as viewers abandon the format.

With sales in decline, all of the big Hollywood studios have been searching for ways to cut costs. Fewer movies are being made while the theatrical release of some films have been pushed back to preserve marketing budgets.

This summer, Paramount, the studio behind recent films such as Star Trek and G.I Joe, explored a combination of parts of its home entertainment business with Sony and 20th Century Fox. It also considered switching to Sony’s DADC DVD production system.

But after several weeks of discussions the studio opted to stay with Technicolor when it agreed to improved terms.

Under the new deal, Technicolor will distribute as well as produce Paramount’s DVDs and Blu-ray discs, resulting in a saving for Paramount.

“They’re going to be working with us on distributing our product to 3,800 Wal-Mart stores,” said Rob Moore, Paramount’s vice-chairman. “It’s a huge part of our business.”

He added that the studio had completed a reorganisation of its home entertainment unit, resulting in a number of job cuts.

The home entertainment reorganisation at the studio has been the subject of much Hollywood rumour but Mr Moore said there would be no more changes. “We now have the organisation in place and a strategy … this is our structure going forward,” he said.

Paramount has scored several hits this year, including Transformers 2: Revenge of the Fallen, the year’s top grossing film. However, the studio recently pushed back the release of Shutter Island, a high-profile Martin Scorsese film starring Leonardo diCaprio, to 2010 to preserve marketing cash.