* 4-month trial program could be extended through 2014
* DVDs made available upon initial release (Updates with financial terms, additional background)
SAN FRANCISCO, Aug 25 (Reuters) - Paramount Home Entertainment and Coinstar Inc’s (CSTR.O) Redbox said on Tuesday they have entered into an agreement that will provide the DVD rental kiosk service with access to Paramount Pictures releases on a trial basis through the end of the year.
Following the four-month trial period Paramount, a unit of Viacom VIAb.N, will have the option to extend the program through 2014, with an out clause after two years.
Under a revenue-sharing agreement, Redbox estimates it would pay Paramount roughly $575 million if the deal runs through the extended period, according to a filing with the U.S. Securities and Exchange Commission.
Paramount’s DVDs will be made available to Redbox on the so-called “street date,” when the title is released to the public. In addition, as part of the agreement, Redbox has agreed to destroy DVDs once the company removes them from the kiosk.
Redbox expects the DVDs licensed and purchased from Paramount to represent close to one-fifth of the Redbox’s 2009 total.
Redbox operates more than 15,000 rental kiosks across the country, and the company is battling multiple video providers over its distribution service.
Some Hollywood studios fear the chain’s $1 rentals are hurting rental revenue and DVD revenues even as the overall DVD market is shrinking.
Redbox has sued Time Warner Inc TWX.N unit Warner Home Video, News Corp’s (NWSA.O) Twentieth Century Fox and Universal Studios for trying to stop it from renting out films on the day of retail release. (Reporting by Gabriel Madway and Matthew Lewis; Editing Bernard Orr)