Par ax falls again as studio in talks to merge DVD operations with Sony or Fox (FT, DHD, LAT, NYT, THR)

By R. Kinsey Lowe

Just because a studio's on a roll with a couple of big blockbusters doesn't mean the ax won't fall, as the situation at Paramount Pictures continues to bear out.

With the industry looking at as much as a 20% decline in DVD sales, Paramount is in discussions to merge home entertainment administrative and distribution operations with either Sony or Fox. Reports of those preliminary talks first emerged Tuesday on the Financial Times web site.

In addition to a continuing realignment that recently placed Adam Goldman atop the studio production hierachy, Paramount disbanded its New York-based literary department on Tuesday and further slashed production staff by 31 positions.

Whether the studio will re-establish a literary presence in New York or Los Angeles has not been determined.

Developments at Paramount -- whose summer megahits "Transformers: Revenge of the Fallen" and "Star Trek" were accompanied by the glaring flop of "Imagine That" and spring blemish "The Violinist" -- also were by Deadline Hollywood Daily, New York Times, Variety and the Hollywood Reporter.

Paramount Film Group president Goodman informed staffers of the new cutbacks Tuesday morning. Those moves follow the removal of John Lesher, with whom Goodman had shared responsibilities, and production president Brad Weston. Lesher and Weston got the kind of consolation-prize production deals that typically accompany high-level studio exits.

DHD noted that the departures of head of Physical Production Georgia Kacandes, senior vice president of production Ben Cosgrove, executive VP of production Dan Levine, senior VP of visual effects Kim Locascio, head of casting Gail Levin, Paramount Vantage chief Guy Stodel, NYC literary rep Aimee Shieh, and NYC creative exec Mac Hawkins "looks like Goodman cleaning house ... Kacandes, Stodel and Levin were brought in by Lesher, while Cosgrove and Levine were put in place by Weston."

Apart from those cutbacks, combining DVD production and physical distribution would likely result in considerable savings for Paramount.

The Financial Times said the talks were proceeding well, but neither Paramount, nor Sony nor Fox would comment on the negotiations.

One scenario would involve Paramount switching from Technicolor's DVD production system to Sony's, according to the Financial Times.

After any consolidation of back-office, physical production, distribution and administrative operations, however, each partner would outwardly remain separate entities with independent marketing and sales units.

The New York Times noted that getting out of DVD marketing "might make it difficult for the studio to attract top-flight filmmakers" who would expect the studio to retain tight control of revenue and maintain solid relations -- and shelf space -- with retailers.

Fox's highly regarded home entertainment division handles video for several companies including MGM and Lionsgate. Sony's home video unit is also well-regarded.