On the surface, Buena Vista Television's and Encore Media
Group's recent multiyear pay TV distribution deal seems ordinary, but industry executives
said elements within the agreement could have far-reaching effects for pay TV and
The four-year deal, with an option for an additional six
years, gives Buena Vista the ability to extend by several months the traditional three- to
four-month PPV window to maximize PPV and video-on-demand revenues.
"The PPV and VOD businesses are burgeoning businesses,
and we feel that allowing us to expand the window will make a difference," Buena
Vista president Mort Marcus said. "We hope [the deal] will create real revenue within
the PPV window."
The deal also allows Buena Vista to offer movies via PPV
through the Internet well into the pay TV window. While distributing movies over the
Internet is still evolving, industry observers said, it could be a major revenue generator
for studios within the next decade.
Other studio executives applauded the Internet-PPV terms.
"Why not take advantage of as many potential distribution outlets as you can?"
one studio executive asked. "Once widespread distribution of the Internet through the
television is realized, then we'll see a major boom in that category."
Some industry observers said the deal could make it harder
for other premium services, such as Showtime and Home Box Office, to deny similar
provisions in future rights negotiations with studios.
"What Encore has done in effect is all but erase the
concept of exclusive pay TV windows," one industry executive said.
Representatives from HBO and Showtime could not be reached
for comment at press time.
Encore, for its part, touted provisions in the deal that
allow it to offer titles on a subscription-VOD basis during the pay TV window.
Encore chairman John Sie envisioned that for an extra $3 to
$5 per month on top of Encore's monthly fee, consumers would be able to access about 50 to
60 movies each month via SVOD.
The concept is not new: Both HBO and Showtime have similar
deals with their studio partners.
But only a few systems currently have the server capacity
to offer SVOD. Also, only Buena Vista and three smaller studios -- Destination Films,
Samuel Goldwyn and Shooting Gallery -- have SVOD deals in their agreements with Encore.
But Sie said he hoped Encore -- which is owned by AT&T
Corp.'s Liberty Media Group -- would be able to reach SVOD agreements with other studio
providers, including New Line Cinema, Universal Pictures, Fine Line, Imagine and October
Sie said he believes SVOD will be at least as lucrative for
operators as VOD. Comparing Encore premium usage with DirecTV Inc.'s PPV numbers, he
added, Starz!/Encore subscribers watch upward of 10 or more movies at about $10 per month,
versus only about two movies per month via PPV on DirecTV at $3 apiece.
He added that consumers would feel more at ease paying a
flat fee for ordering SVOD movies than paying per each PPV or VOD order. "This is
truly an enhancement, rather than a transactional service," Sie said.
But at least one studio executive expressed concern that
the SVOD format would hurt future VOD revenues.
"If I'm a consumer, why would I pay $4 or $5 for a VOD
movie when I can order the same movie three months later for a flat premium fee?" the