Comcast, Showtime ink movie channel pact

Deal represents small victory for Viacom

NEW YORK — Comcast upped the ante in its negotiations with movie packagers Starz Encore and HBO Wednesday, as the cabler sealed a new comprehensive premium package deal with rival Showtime Networks. The deal is the first new movie channel deal agreed by the mega-cabler and replaces separate, pre-existing deals that Showtime had with AT&T Broadband and Comcast.

The pact also marks a small victory for Showtime parent Viacom, which is still in heavy re-negotiations with Comcast over MTV affiliate deals. Viacom is believed to be facing considerable resistance on price increases.

Subscriber incentive

Company sources would not disclose precise terms or total value of the Showtime deal, but the new agreement is believed to provide Showtime incrementally more money per sub than previous deals, though mostly to compensate for the addition of its OnDemand option which Comcast will offer to premium subs at no additional charge.

The agreement covers Showtime, the Movie Channel, Flix, Showtime HDTV and the multiplex channels and also covers the launch, distribution and marketing of the Showtime’s subscription video on demand services Showtime On Demand and the Movie Channel On Demand. The SVOD services will be rolled out across Comcast’s 21 million subscribers over the next year as is technologically feasible.

The deal could have a ripple effect throughout the pay TV market. HBO is still actively in negotiation with Comcast over its new carriage terms, and the operator as yet does not carry the HBO On Demand package on a regular basis. Nor does it carry Starz On Demand.

Win-win deal

By announcing the deal with Showtime as a win-win for both parties, Comcast may be firing a shot across the bow of Starz-Encore.

Comcast and Starz-Encore are locked in a bitter lawsuit over what Comcast regards as unconscionably high license fees charged to AT&T’s cable systems, which Comcast took over last year. Comcast regards the license fees as part of a sweetheart deal struck by John Malone because at the time, he also owned the cable systems as well as Starz-Encore.

Comcast is putting the squeeze on Starz-Encore in ever more obvious ways. In an amended complaint to the lawsuit this week, Starz-Encore charges that Comcast has “terminated” all marketing and advertising support for Starz and all of its multiplexed networks, even the support previously agreed on by both sides either verbally or in writing. A Starz spokesman declined to comment on the dispute with Comcast.

Pressure upped

Comcast is currently paying its own ratecard for Starz, rather than the vastly more expensive AT&T terms. But the Comcast deal is believed to end in December, which puts increasing pressure on the current legal tussle.

Agreeing to new affiliate deals at more favorable terms, given its newly enhanced 21 million-subscriber footprint, is a cornerstone of Comcast’s cost-rationalizing regime. In what Comcast CEO Brian Roberts has called “Phase I” of programming cost savings, some $270 million will be cut this year from simply choosing the better of the AT&T or Comcast carriage terms. Phase II cost-cutting involves cutting new, unified contracts as channel’s come up for renewal and Comcast seeks to reduce fee increases as demanded by programmers.

(John Dempsey contributed to this story.)

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