Studios Revamp International Joint Venture

Universal Pictures and Paramount Pictures on Tuesday revamped their 24-year-old joint venture to distribute films internationally as each studio seeks more control over its movies in crucial foreign markets, the companies announced late Tuesday.

The deal doesn’t eliminate London-based United International Pictures, which now operates in 35 countries, but substantially dismantles much of its operations.

Both studios have increasingly soured on the joint venture, seeking to establish their own foreign distribution operations as the overseas box office has assumed a bigger role in Hollywood’s success. For more than a decade, more than half of Hollywood’s ticket revenue has come from foreign countries. Executives at both studios have increasingly felt hemmed in by the joint venture.

Under the deal, the two will split United International’s operations in 15 countries.

Paramount will own and operate the business in Australia, Brazil, Britain, France, Ireland, Mexico and New Zealand. Universal will own and operate facilities in Austria, Belgium, Germany, Italy, the Netherlands, Russia, Spain and Switzerland.

Each studio would then be free to build its own distribution operation in markets in which the other studio takes over the venture’s business. The studios will have the option to distribute feature films through each other’s operations for as many as two years.

Universal will continue to distribute DreamWorks Animation SKG Inc.’s theatrical product internationally.

A scaled-down operation will continue to distribute Paramount and Universal films in 20 countries: Argentina, Chile, Colombia, Denmark, Greece, Hungary, India, Japan, Malaysia, Norway, Panama, Peru, Poland, Singapore, South Africa, South Korea, Sweden, Taiwan, Thailand and Turkey.

In a statement, Universal Vice Chairman Marc Shmuger said the arrangement “ensures that [the venture] will continue to operate for many years to come, while recognizing the long-term strategic importance for us as a studio to directly control our own international distribution and marketing operations.”

Rob Moore, Paramount president of worldwide marketing and distribution, said: “Our goals of utilizing our global assets to maximize international growth can only be fully realized with this exciting new structure.”

Viacom Inc.-owned Paramount and Universal, owned by General Electric Co., split the overhead costs of operating the venture.

Paramount’s new international operation will be based in Los Angeles; Universal’s international group will be in London.

Paramount will establish a European regional office.

The venture was formed in 1981 when foreign box-office revenue was a relatively small part of the money that films earned. A third partner, Metro-Goldwyn-Mayer Inc., withdrew from the partnership in 2000. MGM has since been acquired by an investment group led by Sony Corp.