Sources: Paramount in talks to merge backroom DVD operations with Sony and Fox

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Paramount Pictures is in talks with at least two of its competitors to merge some elements of its home video backroom operations, people briefed on the negotiations said.

While negotiations are in a very preliminary stage, the Viacom-owned studio has initiated discussions with Sony Pictures and 20th Century Fox to combine the production, distribution and administrative elements of their DVD businesses, these people said. The talks are not limited to those studios and could expand to other studios, with Universal being a leading candidate.

People close to the talks stressed that any potential combination would be about saving costs, not about sharing revenue. The studios would not combine marketing or promotion of home entertainment.

There is precedent: Universal and Paramount formed a joint venture years ago called CIC to handle video distribution in international markets.

These talks come at a time when major retailers, including Wal-Mart and Best Buy, are reducing the amount of space they dedicate to carrying DVDs. First quarter DVD sales fell 14% in the first quarter of this year, compared to 2008, according to DEG: The Digital Entertainment Group, a non-profit trade group.

News of the talks was first reported by The Financial Times.

-- Joe Flint and Dawn C. Chmielewski