Pay-TV channels HBO, Showtime and Starz are about to get a new competitor in their lucrative and insular world, the Wall Street Journal reprots.
Viacom Inc., Metro-Goldwyn-Mayer Studios Inc. and Lions Gate Entertainment Corp. Sunday announced a new joint venture to launch a premium channel, scheduled to debut in the fall of 2009. Stocked with movies and original TV series from the three companies' five studios, the as-yet-unnamed subscription service will attempt to muscle into a market that's been dominated by the same players for decades.
The surprising announcement shows that the premium-cable model that dates back to the 1970s is showing new potential with the growth of video on demand.
But it also a slap in the face to CBS Corp., Viacom's corporate sibling until they were split up by Sumner Redstone, who still controls both. CBS owns Showtime, while Viacom has Paramount Pictures and the MTV cable properties. CBS is treading on Viacom's turf with its recent announcement that it will make theatrical movies as CBS Films; now Viacom, with its new pay channel, is moving in on CBS's territory.
Mr. Redstone, chairman of both companies, blessed the deal, saying in a statement: "I have stated from the beginning that Viacom and CBS have the right to pursue their own strategic objectives in the best interest of their individual shareholders. Competition between the two companies hones their skills and their productivity."
For the studios involved, the new venture represents a high-stakes gamble. Showtime now pays the three companies' studios hundreds of millions of dollars a year for the pay-TV rights to their movies. But those contracts only cover Viacom movies that opened through the end of last year, and they will cover openings from MGM and Lions Gate (which operates as Lionsgate) through 2008.
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