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Showtime’s Film Suppliers Start Up Rival TV Channel

Paramount Pictures, Lionsgate, Metro-Goldwyn-Mayer Studios to Launch Premium Pay Channel in Fall 2009

By Robert Marich -- Broadcasting & Cable, 4/21/2008 10:31:00 AM

Premium pay channel Showtime, which is part of CBS, lost its main three film-rights-output deals when Paramount Pictures, Lionsgate and Metro-Goldwyn-Mayer Studios announced Sunday that they would together launch a premium pay channel in the fall of 2009.

Iron Man

Viacom, Paramount’s parent, will handle marketing and affiliate services for the yet-to-be-named venture through its MTV Networks division. The venture’s movie-distributor partners will be free to offer films in digital new media while the same films are in the premium pay window, which third-party pay channels always seek to prohibit in licensing contracts.

A press release announcing the new entity cited video-on-demand as a key business. The three film companies are also thought to have banded together due to unhappiness with prices Showtime offered for renewing film-rights contracts.

Viacom and CBS are separate companies after a December 2005 split-up, but both remain controlled by Sumner Redstone. In a statement, Redstone expressed support for the channel venture

The departure of three film suppliers leaves Showtime without any output deal with a big distributor for features, although premium pay outfits have said that the proliferation of movies available on new digital media have diminished the value of theatricals. Showtime can acquire second-run and library rights to features. Premium pay channels have put more emphasis on original TV series, with HBO’s head-turning The Sopranos a prime example, due to the exclusivity and rub-off branding on channels. Still, Showtime’s loss of Paramount films is a blow because the studio ranked first in domestic theatrical market share in 2007.

Time Warner’s HBO has first-run premium pay rights to film from 20th Century Fox, Universal and Warner Bros., while Liberty Media’s Starz has Disney (including Miramax) and Sony Columbia under multiyear deals.

Output deals for first-run premium pay rights from each of Hollywood’s six major studios run around $150 million per year, with exact costs varying depending on the number of films delivered each year and their box-office performances. Lionsgate and MGM are not majors.

According to a press release from the new joint venture, the deal includes “Paramount and Paramount Vantage titles released theatrically on or after Jan. 1, 2008, and MGM, United Artists and Lionsgate titles released theatrically on or after Jan. 1, 2009.” Upcoming films going to the new channel include Iron Man, Star Trek, Pink Panther 2, Cloverfield, The Curious Case of Benjamin Button, ShutterIsland, GI Joe, Love Guru and Valkyrie. The partner film companies will also supply their TV programs.

In early 2007, CBS created a theatrical-film division with a goal to produce 4-6 moderately budgeted films per year, with premium pay rights to be funneled to Showtime. At the time, the creation of CBS Films was viewed with surprise, given CBS ties to Viacom’s Paramount Pictures via mutual shareholder Redstone, and it was interpreted as Leslie Moonves-led CBS asserting its independence from Viacom.

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