Paramount Plans to Outsource

Hollywood’s largest revenue source, Viacom Inc’s Paramount Pictures is in talks with other studio to outsource the back office portions of its home-entertainment operations. This is an attempt to cut back on costs in the declining markets of DVD’s.
Paramount is trying to explore a potential outsourcing agreement with News Corp’s Twentieth Century Fox, Sony Corp’s Sony Pictures and General Electric Co’s Universal Pictures.

Sony is one of the leading contender as it has both manufacturing and distribution operations in house. The executive of Sony confirmed that, the company is in talks with Paramount to handle Paramount’s DVD distribution and back office functions.
Under the potential agreement, Paramount could handle marketing and sales for its DVD’s. Its studio partner will handle production and distribution which will be in exchange for a fee. Outsourcing these operations to another studio will help paramount to save somewhere between 410 million to $20 million annually.
This is not the first time that a Hollywood studio is outsourcing its back office operations to save costs. Twentieth Century Fox handles the domestic home video production of Metro-Goldwyn-Mayer.

Some decades ago, Universal and Paramount distributed films internationally through the same company named CIC video owned by Cinema International Corp. For years the sale of DVD’s was high in Hollywood Studios. This allowed the producers to spend on big budget films than to pay lavish salaries to top movie stars.
The format of disc format was hit hard by the economic recession at the end of 2008. This caused a dip in sales of DVD’s by the last quarter. The sales have continued to slide and some studios are reporting declines which are as large as 20%.
These massive declines have forced Hollywood studios to find out ways to cut down on costs especially on high manufacturing and shipping costs that can make an impact on studios like Paramount.

According to Adams Media Research, the gross U.S video of Paramount including the titles it distributes for DreamWorks Animation fell to 3.4 % which was about $2.61 billion. This drop was less than many studios that included Fox and Sony.
Paramount faced some of the major challenges which included the departure of its top home entertainment executives as well as restructuring of top level executives and 31 layoffs in the production department.