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MGM Pay TV Chief Talks to Nets, MSOs

1/09/2000 7:00 PM Eastern

More than six months after Metro-Goldwyn-Mayer Studios Inc.
hired industry veteran Jules Haimovitz to develop cable and satellite channels, the studio
is still trying to figure out its domestic pay television strategy.

Sources confirmed that MGM has had talks with Starz Encore
Media Group LLC and Cablevision Systems Corp.'s Rainbow Media Holdings Inc. about
distributing premium-movie channels to cable operators. And an AT&T Broadband &
Internet Services spokeswoman said last week that the MSO has had "preliminary"
talks with MGM about carrying the company's proposed movie channels.

But sources said MGM still hasn't determined how many
channels it will develop, nor whether the company will put the channels into a joint
venture or own them outright. And it's still not clear how many movies MGM would be
able to run on the channels, since many of its films are locked up in long-term rights
deals.

In September, MGM launched an initiative to reclaim the
rights to many of its movies, striking a deal to obtain broadcast rights to more than 800
of its films that were licensed to Turner Broadcasting System Inc.

MGM renegotiated the reversion of its rights to 200 titles
and secured the rights to broadcast 600 films on a nonexclusive basis beginning this
September.

The studio warned investors about the long-term deals in an
October securities filing, stating that "substantially all" of the MGM/United
Artists titles produced prior to 1990 were locked up in licensing agreements.

"A prior management granted long-term domestic and
major international television licenses covering a substantial portion of our library, in
exchange for prepaid fees," the MGM filing stated. "Until these agreements
expire and the rights revert back to us, we expect contributions to earnings and cash flow
from these markets to be below those of our competitors for similar products."

MGM rejected requests to interview Haimovitz.

"Encumbrances are hopefully a thing of the past,"
MGM spokesman Craig Parsons said. "We've been on a big campaign to reclaim a lot
of these rights when we can."

Starz Encore chairman and CEO John Sie said he's
talked to longtime friend Haimovitz about including MGM's channels in Starz
Encore's "Super Pak," which currently has 12 premium-movie channels.

"We feel that if there is any way we can work with the
likes of MGM to create more movie channels that have a point of differentiation from our
current 12 channels, we will do so," Sie said.

Any deal Starz Encore crafts with MGM would also include a
subscription video-on-demand component, Sie said. Starz Encore would take some of the most
popular movies scheduled on the Super Pak channels and offer them separately on SVOD
channels, he added.

"Anything we do from this point on, we don't do
it without SVOD," Sie said.

MGM's and Starz Encore's recent partnership --
the MGM Gold Networks joint venture in Asia -- was terminated in April 1988 after less
than two years of operation.

The two companies attributed the failure of the venture to
the recession in Southeast Asia, noting at the time in a prepared statement that the
recession "had lengthened the required investment horizon to the point where the
original profit objectives were no longer achievable."

"Even with a great name like MGM, without current
product, it was difficult to make it a must-see or a must-carry because it had older
titles that came out of the MGM/UA library," Sie said last week.

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