Paramount and Universal Renew Distribution Pact

Universal Pictures and Paramount Pictures said Thursday that they have renewed their partnership that distributes their films in foreign countries, rescuing a pact that had been in danger of unraveling earlier this year.

The partnership, United International Pictures, was to have expired in 2001. The two studios renewed the deal for an additional five years.

Under the arrangement, the two companies share about $65 million in overhead costs for the company to distribute their films in 48 countries. A third partner, Metro-Goldwyn-Mayer, earlier this year announced it was leaving the partnership next year, opting instead to have 20th Century Fox distribute its films overseas.

For both Universal and Paramount, UIP is considered highly cost-effective. There was some sentiment earlier this year at Universal to leave the partnership so the studio could better control the release of films in the lucrative foreign market, a move that would have required the studio to pay millions of dollars in start-up costs to form a new company. In the end, the financial logic of remaining with the UIP partnership prevailed.

Universal’s foreign distribution operation for video, Universal Pictures International, has an operation that will be folded into the partnership with Paramount. That operation, however, will continue to produce and acquire films that are made in Europe.