Viacom To Chip In $100 Million for New Premium Channel

Dauman: New JV Talking To Distributors Across ‘Many Platforms’

By Linda Moss -- Multichannel News, 5/2/2008 1:11:00 PM

Viacom plans to invest up to $100 million in the premium channel it’s launching with two other movie studios, and the venture is talking to other potential partners about the new pay-TV network, officials said Friday.

During a first-quarter conference call, Viacom president and CEO Philippe Dauman told analysts that since plans for the unnamed service were unveiled April 20, Viacom has been able “to speak freely to potential distributors across many, many platforms.” 

Viacom’s Paramount Pictures, Metro-Goldwyn-Mayer Studios and Lionsgate have formed a joint venture to create the premium TV channel and video-on-demand service that will debut in fall 2009. The studios are not renewing their output deals with Showtime, instead opting to bring their movies to their own pay-TV outlet.  

 “We are exploring multiple distribution platforms and partnerships that also contemplate emerging forms of content delivery,” Dauman said. “We believe that there is significant revenue opportunity here, as we will be able to better serve our audiences across platforms and derive greater value from our own product.”

Published reports earlier this week said that Blockbuster was in talks to invest in the Viacom-led premium channel.

During a question-and-answer session Friday, Viacom chief financial officer Thomas Dooley was asked how much cash Viacom will invest in the premium service. 

“Over the life of the venture, we don’t expect it to be more than $100 million,” Dooley said.

Viacom will be the lead investor, but not majority owner, in the new premium channel, according to Dauman.

“We will not be, at the end of this, the majority owner, but we will be a significant owner of the business,” he said.

Viacom officials were also asked if Viacom will tie affiliation renewals for its MTV Networks cable channels to carriage of the new premium service. Dauman said that while the new premium channel has contracted with MTVN to handle its affiliate sales, that distribution will be handled separately and not bundled with MTVN deals.

“The affiliate-services are being provided for the joint venture, separate and apart from MTV Networks,” Dauman said. “The joint venture has an agreement with MTV Networks to provide, wholly apart from the Viacom efforts, affiliate services and other services.”

There’s been a lot of interest in the unnamed premium channel since it was announced, according to Dauman.

“The level of interest, and in many cases, enthusiasm, has been extremely encouraging to us,” he said. “We believe this is another example of how we can take our content, look at the world in new, different and innovative ways and create more value for Viacom.”

Dauman reiterated his prior comment that the new premium channel will be “a game changer,” in terms of allowing the three movie studios more flexibility in how they can offer their films during the pay-TV window. Speculation is that new service will make its movies available online during the pay-TV window.

“This joint venture is feasible because we find ourselves at a unique point in time when there is product available from multiple studios for the pay-television window, an opportunity that will not be replicated for many years,” Dauman said. “We now have the chance to reinvent this window, and we intend to do so, no longer encumbered by the restrictions previously placed on us and our partners. We will determine our own destiny, controlling our content, and how that content is distributed and marketed.”

Dauman was also asked about Paramount’s decision, along with a long list of other Hollywood studios, to offer its new releases on iTunes on the same day as their DVD release.

“We had been supplying some of our movies to iTunes, primarily our library product, at price points that made sense to us,” he said.

Dauman said that the sale of the iTune movie downloads at $14.99 for new releases “is totally consistent with the other efforts we’ve made in distributing at the right price points, DVDs or equivalents, during the DVD window.”

Viacom -- driven by double-digit gains for its cable networks, films and sales of the video game Rock Band -- saw revenue increase 15% in the first quarter, to $3.12 billion, the company reported Friday.