Universal and Warner Bros. — facing the continued deterioration of physical disc sales — want to pool their DVD distribution businesses under a major new deal.

The studios announced that Universal Pictures Home Entertainment and Warner Bros. Home Entertainment entered into a pact to form a new joint venture to distribute DVDs in North America for new releases, library titles and TV content for up to 10 years.

The companies expect the proposed JV to be operational by the first quarter of 2021. The North American joint venture, comprising leadership from both studios, is to be headed by longtime Universal exec Eddie Cunningham (pictured above), who is currently president of Universal Pictures Home Entertainment.

In addition, under a separate agreement, the studios struck license agreements to divvy up DVD distribution in countries outside North America. Under that arrangement, UPHE will handle distribution of Warner Bros.’ DVD home entertainment products in Germany, Austria, Switzerland and Japan, expected to go live in the third quarter of 2020. Warner Bros. will assume responsibility for distribution of Universal’s DVD products in the U.K. (including Ireland), Italy, Belgium, the Netherlands and Luxembourg, expected to occur in the first quarter of 2021.

The moves come amid the long, slow decline of physical disc sales — which show no signs of reversing — and the ascendancy of streaming video. Sales of DVDs in the U.S. fell 9.4% in 2019, to $5.9 billion, down from about $9 billion in the U.S. in 2011, according to trade group DEG: The Digital Entertainment Group.

While they intend to merge DVD distribution operations, under the proposed structure, the studios will continue to operate their digital distribution businesses independently — and retain content and consumer marketing for both physical and digital entertainment products.

According to Universal and Warner Bros., the tie-up on the DVD sides of their houses will help both of them gain operational efficiencies and be able to better respond to evolving customer demand. The North American JV will combine sales, retail marketing and distribution for the two physical home entertainment operations and be responsible for Blu-ray, DVD and 4K Ultra HD distribution through 2031, under the proposed terms.

“As the home entertainment landscape evolves, we are continuously working to deliver the best entertainment range and value to our fans,” Ron Sanders, Warner Bros. president, worldwide theatrical distribution and home entertainment, and EVP international business operations, said in a statement. “The physical business is still an important and active category for the industry. This proposed joint venture with Universal gives us the best opportunity to foster innovation in this business, optimize the physical offering and extend the lifespan of the format for our fans and consumers.”

Peter Levinsohn, Universal Filmed Entertainment Group president and chief distribution officer, commented, “With market conditions and consumer viewing behaviors continuing to evolve, we wanted a partner who shares in our commitment to deliver the best consumer proposition going forward. This proposed JV presents a significant opportunity to continue to work with our retail partners to ensure the format’s strength and sustainability for years to come.”

The proposed JV between UPHE and WBHE is subject to regulatory approval from the U.S. Justice Department.

Regarding Cunningham’s appointment to lead the new North American DVD JV, Levinsohn said, “For more than two decades Eddie has been an expert in understanding the evolution of the physical home entertainment landscape. He’s been a dynamic leader in shepherding business innovation and operational effectiveness.”