NEW YORK — Disney’s Buena Vista Television and Encore Media Group have inked the most expensive pay TV movie output deal in history, a pact that could total $3.4 billion.
That’s almost twice the price of Buena Vista’s current deal with Encore, which owns the Starz! pay TV network and 12 other premium cable channels.
The complex, four-year agreement covers all theatrical releases from Touchstone, Hollywood Pictures, Miramax and Dimension labels from January 2003 through Dec. 31, 2006.
The deal is estimated to deliver an average of 40 pictures per year. The agreement also gives Buena Vista several options to extend the relationship though 2012. If all the options are exercised, the deal will cover 10 years.
Renewing its Buena Vista deal was essential for Encore because the only major studio the programmer has under contract is Universal. Encore also has output deals with smaller studios including New Line, Fine Line, Imagine, October, Shooting Gallery and Samuel Goldwyn.
HBO’s bids were said to be neck and neck with Encore’s, with Showtime dropping out of the bidding at about 25% less than the deal price.
Mort Marcus, president, Buena Vista TV, and John Sie, chairman and CEO, Encore, declined to discuss the financial terms of the deal.
The deal contained several elements that differ from previous pay TV output deals. Sie said that it was the innovations on both sides of the table, not the amount of the final bid, that sealed the deal.
“If this was purely a financial auction, we would have lost,” Sie told Daily Variety.
In addition to buying the rights to run the films on all of their current and future pay channels, Encore also obtained the right to offer the films via what Sie calls “subscription TV on demand.”
When video-on-demand technology rolls out in cable and satcaster homes, Encore will offer all of the Buena Vista films it has under license that particular month via on-demand.
That means that subscribers to Encore’s pay channels who pay an additional “nominal” monthly fee will also have the option to order any one of the several hundred titles available that month and watch it immediately.
“For pay TV to continue to be robust, it has to go into subscription (viewing) on demand,” Sie said.
Encore’s “SVOD” rights kick in immediately, meaning that they apply to the current Encore/Buena Vista deal currently in place.
Marcus said the deal was especially attractive to Buena Vista because it gives his company unprecedented flexibility.
By signing a four-year deal with options to go to 10, Buena Vista can guard against any radical changes in the TV business, such as the rise of new media or other new pay TV players entering the field.
“Anytime we do a really long-term deal, it’s scary on both sides,” Marcus told Daily Variety. “We want to make sure we have all the protections we can. (In a few years), there could be 20 pay TV networks.”
Buena Vista also won several other concessions in the deal.
Instead of getting the three windows of a traditional pay TV deal, Encore will get two runs of Buena Vista pictures. Buena Vista will also gain an undisclosed extra amount of time between Encore’s windows to run the films on ABC or the Disney Channel.
PPV window extended
In addition, the agreement gives Buena Vista an undisclosed longer pay-per-view/video-on-demand window before Encore’s pay TV window begins. After a film’s theatrical run, it goes into homevideo, PPV and then to pay TV.
Even after Encore starts running the films, Buena Vista will still have the right to sell its movies via PPV and VOD.
“Pay-per-view and video on demand are becoming a very big deal,” said Marcus. “Our pay-per-view window never ends.”
Encore’s current output deal with Buena Vista is said to average between $160 million and $170 million per year. The new deal will bring Buena Vista about double that.