Universal Pictures International Entertainment is to distribute physical video product for Sony Pictures Home Entertainment in Italy from October 2013. Universal will provide operations, finance and marketing support in order to maximise studio efforts in the Italian market.
Sony has also confirmed a separate home video distribution deal with Fox in Spain. Fox will manage the marketing and distribution of Sony's DVD and Blu-ray Disc (BD) releases, also from October 2013.
Whilst the distribution deal marks the end of Sony's physical home entertainment operations in Spain both this deal and that in Italy exclude content delivered digitally. Sony Pictures and NBC Universal's affiliate film, TV and digital distribution businesses in Italy and Spain respectively are not included in either agreement.
A number of major Hollywood studios have sought out reciprocal distribution agreements in Spain and Italy in recent years, largely in response to poor trading conditions and economic instability. However, Sony's simultaneous withdrawal from Spain and Italy is a further indication of the wavering support major studios hold for those international video markets suffering chronic year on year declines, such as those in southern Europe.
The video markets in Spain and Italy overall experienced further contractions in 2012, declining by 14.8% and 17.7% respectively. Both territories are thought to suffer from high levels of video piracy and both have seen video retailer and distributor contractions and closures. This has made trading conditions increasingly costly and complex for the studios, prompting them to review their distribution strategies in these territories.
The move follows Paramount's 2011 closure of home video operations in Italy, also opting for Universal to distribute physical new release and catalogue product in Italy. Similarly, in Spain, such agreements are also well established, with Paramount distributing the Universal home entertainment product slate since 2010. Elsewhere, in May 2013 Paramount announced a partnership with Fox in the four Scandinavian markets, mirroring an earlier pact between Universal and Sony in the Nordics, while similar deals exist between Paramount and Universal in Benelux and Mexico (2011), Universal and Fox in Russia and New Zealand (2011) and Sony and Universal in Australia (2011).
As previously indicated by IHS, further consolidation in such territories will become necessary as studios look to reduce costs internationally. Partnerships of this kind, however, could create opportunities for local distributors to manage studio content. Independent companies that command a large market share in individual countries and particularly those active in multiple territories will be those likely to benefit.