HBO has reinforced its long-term commitment to theatrical movies, renewing its output deal with 20th Century Fox through the end of the next decade.
Fox will collect more than $1 billion over the course of the 10-year contract. The studio now becomes HBO’s longest-running movie-output partner, having engineered the first deal in the early 1980s.
The Fox agreement assures a steady flow of fresh theatricals to HBO, which had previously locked up deals through 2013 and later with Universal, Warner Bros., New Line and DreamWorks. HBO is still open to more deals if the opportunity arises.
“It’s good to have this deal complete,” said Harold Akselrad, co-president of HBO. “We now have films from all our current output partners set into the next decade.”
These output deals give HBO more movies than its two rivals, Starz and Showtime, combined. The cabler will be able to schedule these movies on HBO, its pay TV sibling Cinemax and all of their multiplex nets.
In addition, HBO and Cinemax will get the movies for their video-on-demand platform and, in the future, for subscription Web sites HBO sets up with cable operators. People who subscribe to HBO will also be able to get the network’s movies through VOD and through Internet broadband.
The money HBO pays Fox for a movie comes out of a formula heavily dependent on the domestic box office gross of the movie. But over the long term, HBO will pay an average of $6 million-$7 million each for the titles in the output deal.
One benefit to Fox is that HBO will schedule periodic behind-the-scenes documentaries on new movies that the studio releases to theaters — an invaluable promotional tool for the studio.
The talks between HBO and Fox dragged out longer than expected, at least in part because of the discussions about making the movies available on VOD and broadband. But there was no doubt that the deal would get done because HBO is gung-ho about theatricals as a necessary complement to its aggressive slate of original series like “Entourage,” “Big Love” and “John From Cincinnati.”
HBO regards theatricals as the lifeblood of its multiplex channels and its on-demand service, which attracts more viewers than the VOD programming of any other network. Fully 70% of the schedule of HBO and its multiplexes consists of theatrical movies.
For its part, Fox pushed to get the deal done because it had no other pay TV outlet as a backup. Starz fills its movie needs through output deals with Walt Disney and Columbia Pictures; Showtime is convinced that original series and fresh movies through the newly formed CBS Films are a better way to go than ponying up more than $100 million a year for theatrical pics. Showtime is even reluctant to renew its current output deals with Paramount Pictures, MGM and Lionsgate Pictures, all of which expire in the next two years.
Mark Kaner, president of Twentieth Century Fox TV Distribution, negotiated the deal for Fox.