Studio is in negotiations with Sony, Fox

Paramount Pictures is in talks to farm out some of its home entertainment operations to another studio, which would likely result in considerable cost savings to the Viacom unit.

Paramount is in negotiations with Sony Pictures Home Entertainment and 20th Century Fox Home Entertainment, and possibly others, to take over physical fulfillment of its product to retail and back-office functions such as billing and collections. Fox has similar relationships with Lionsgate and Anchor Bay Entertainment, and Universal provides similar service to Summit Entertainment, but no major Hollywood studios currently handles such duties for another major.

Paramount would retain its own brands and sales and marketing departments. It also currently handles distribution of DreamWorks’ live-action titles through 2010 and DreamWorks Animation titles through 2012, which would presumably also be included in whatever deal Paramount strikes.

The discussions, which were first reported by Financial Times, are the latest in a string of significant changes at Paramount, which has been without a division president since Kelley Avery left the company in May. Domestic president Meagan Burrows and several other senior executives left the division in December.

The studios involved had no comment.

Like other studios, Paramount is grappling with the maturation of the DVD market, which saw consumer sales fall by about 15% in the first quarter. While sales of the new Blu-ray high-def format are growing by over 100%, neither it or new digital formats are yet large enough to counterbalance the DVD decline.

A deal with Paramount would put another studio in the position to collect fees on a large volume of product. The studio will have two of the fall’s biggest home entertainment titles: “Transformers: Revenge of the Fallen” and “Monsters vs Aliens.”

Marcy Magiera is the editor of Video Business; Susanne Ault is VB senior reporter. VB is a Variety sister publication.

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