At least not every major Hollywood studio is hating on Redbox these days.
Viacom's (NYSE:VIA) Paramount and Coinstar's (NASDAQ:CSTR) army of Redbox kiosks announced yesterday that they will extend their revenue-sharing agreement through at least next summer, and possibly as far as the end of 2014.
Viacom's warm approach toward the master of overnight DVD rentals for a buck is a refreshing contrast to the legal barbs being volleyed between Redbox and Paramount's rival studios. Time Warner (NYSE:TWX), News Corp.'s (NYSE:NWS) 20th Century Fox, and General Electric's (NYSE:GE) majority-owned Universal are trying to keep their new releases out of the automated machines. Fearing that Redbox rentals are eating into DVD sales, the studios want Redbox to wait a few months before stocking their latest home video releases.
Do the studios have a legitimate beef? Sure, DVD sales have tailed off during Redbox's ascent, but that could owe just as much to the popularity of video-sharing sites, cable programmers offering video on demand, and Netflix's (NASDAQ:NFLX) online streaming.
If Redbox is destroying the perceived value of the DVD, why are local multiplexes' revenues hopping, despite charging record ticket prices?
Besides, shouldn't Paramount's extension mean something? Viacom isn't stupid. It wouldn't cozy up to a company that might eventually put it out of business.
"The data from our initial trial period has been encouraging," said Dennis Maguire, worldwide president of Paramount Home Entertainment, in yesterday's announcement.
Traditional rental chains, on the other hand, have every reason to fear Redbox. It's a direct competitor with cutthroat pricing. Even Blockbuster (NYSE:BBI) is going head-to-head with Coinstar through its Blockbuster Express machines.
However, the studios have more to gain from working with Redbox -- and either realizing the joys of additional revenue streams, or improving the value of their DVD product -- than fighting against it.
Is Viacom doing the right thing by teaming up with Redbox, or is it sleeping with the enemy? Share your thoughts in the comment box below.
