Malone moves into animation biz

In a move that could turn Starz into a small-scale media conglom, embattled paybox’s parent company, John Malone’s Liberty Media, is acquiring IDT Entertainment in a deal worth more than $200 million.

IDT Entertainment, a division of telco IDT, owns animation studio Film Roman and homevideo distributor Anchor Bay, has a full slate of CG feature films in development, and is working with former MGM No. 2 Chris McGurk to develop theatrical distribution and live-action feature operations.

Liberty, which has minority stakes in IDT and its telecom subsid, will trade those shares and pay an additional $186 million to wholly acquire the firm. It also will assume IDTE debt.

In a way the deal is classic Malone: Take a small stake in a large company, then trade for a piece of that company’s business that you really want.

The investor is widely perceived as trying to leverage his growing stake in News Corp. into full ownership of one of the conglom’s new-media businesses. (At a conference last week Liberty execs joked, “We’d take MySpace.”)

Malone also is negotiating with TW to trade part of his 4% stake in the conglom for ownership of Major League Baseball team the Atlanta Braves.

Deal apparently came together relatively quickly in the past few months and surprised many insiders, as IDTE is a young company that was not on the block. It was only three years ago that IDT bought Film Roman, one of its first major moves in the media space.

Acquisition apparently was worked out directly between Malone and IDT chairman Howard Jonas.

“I don’t think IDT was looking to get rid of IDT Entertainment, but it’s a great situation to see one of its assets at a sizable profit,” said IDTE chairman Steve Brown.

IDTE has a two-year distribution pact with Fox that starts with September-dated toon “Everyone’s Hero.” Pics distributed through Fox will go to HBO, but all future IDT animated and live-action features undoubtedly will air on Starz. Once the deal closes, the two Liberty units will commence a five-year output agreement.

That could help solve Starz’s potential output woes. Net has deals with just two studios, Disney and Sony, both of which expire within the next five years.

IDT also is expected to start producing original TV skeins, telepics and interstitials for Starz.

Move marks the first foray for Liberty into the feature film biz. Starz and Encore rep Tom Southwick noted that with the acquisition, his company could look to simultaneous releases and other windows-inverting strategies.

“This really gives us the opportunity to experiment,” he said.

Such plans are largely theoretical, however, as IDTE is still a fledgling unit with only a few original productions under its belt, including Showtime series “Masters of Horror” and last year’s unsuccessful toon “Valiant,” produced by its partially owned subsid Vanguard Animation.

While IDT Entertainment — which will likely take on a new name — and Starz will remain separate units of Liberty, they will work closely together to form a cohesive entertainment strategy.

“Not only will it be good for the bottom line to cover all distribution windows, but it will help us attract a higher caliber of filmmakers to work with us,” said IDTE CEO Morris Berger.

He and Brown are expected to stay in their current posts, along with the rest of the management team.

McGurk, who joined the company only two months ago, would be an obvious candidate to take a top position as Starz and IDTE combine their operations. His current title is senior adviser, new ventures, but he was already expected to run IDTE’s live-action feature production and distribution operations once he gets them started.

IDTE execs also had been looking to expand into Internet distribution, which they can potentially do with Starz’ Vongo, a recently launched Web-based movie subscription service.

Vongo could be used for both new content and Anchor Bay’s homevideo library.

Acquisition likely will close later this year following regulatory approval and other conditions. Liberty may end up having to pay IDT more money depending upon the appreciation of IDTE’s value over the next five years.

IDTE will join a Liberty portfolio that includes cablers like GSN and QVC.

(Ian Mohr contributed to this report.)

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