Universal Pictures, the only major studio that has not engineered an output deal for its theatricals with HBO or Showtime in recent years, has struck a deal with Tele-Communications Inc. and Encore to create a new pay-cable network, with Universal movies as the cornerstone.
Though no financial details were given, sources close to the company pegged the deal at about $ 350 million, while company insiders say the price is higher.
The deal starts with two Universal movies released at the tail end of last year, “Scent of a Woman” and “Lorenzo’s Oil,” and covers the company’s theatricals from 1993 through 1997. Sources say TCI and Encore will pay competitive prices for the movies, which will average out to $ 5 million or so a title.
Liberty Media, a spinoff subsidiary of TCI, the largest cable operator in the U.S., owns 90% of Encore, which is a 2-year-old minipay network that programs movies of the ’60s, ’70s and ’80s.
“This agreement addresses the fact that pay households have missed seeing Universal movies for a number of years now,” says John Sie, chairman and CEO of Encore Media. Until now Universal has instead chosen to bypass pay-cable in favor of selling its movies directly to three of the four broadcast networks: CBS, NBC and, most recently (in a package headed by the hit comedy “Beethoven”), Fox.
Sie says the new channel (still unnamed) will start operating in January 1994 , when the first of the Universal theatricals become available. It’ll be commercial-free.
Tom Wertheimer, head of the MCA TV Group, says HBO and Showtime “will now have a full-blown competitor in the pay-cable business.”
TCI is positioning the new channel as a natural extension of the six additional commercial-free multiplexed channels Encore announced earlier this week. Each of the six will have a theme — Western, Mystery, Action/Adventure, Love Stories, True Stories/Drama and Tweens — and they’ll draw on the same 2, 500 theatrical and TV movies in the Encore library. Encore has also bought 3,500 TV series episodes to help stock the six channels.
However, the six won’t come on line until July of 1994, when TCI’s cable systems start using digital technology to expand their channel capacity by compressing seven channels into the band width now occupied by only one.
Although he hasn’t yetdecided how much to charge subscribers for the new pay channel, Sie says that because of the new Universal pictures in its inventory (most of which will be available within a year of their theatrical runs) it could end up as the locomotive of a package encompassing Encore and the six multiplexed channels.
To flesh out the schedule of the new pay network, Wertheimer holds out the prospect that Universal and Encore “could get together and co-produce original made-for-pay-TV movies” that would make their debut on the new network.
And Sie says that HBO and Showtime had better watch out, because he’s ready to start going after theatricals from other major studios as soon as their current output deals expire.