In a pickup that will help bolster the network if cable operators decide to raise subscriber fees, Showtime has signed a long-term $ 200-million-plus deal with TriStar Pictures.
The transaction gives Showtime pay-cable rights to TriStar’s theatrical releases well into the 1990s.
The agreement includes such highly touted upcoming pix as “Sleepless in Seattle,” starring Tom Hanks and Meg Ryan, and Jonathan Demme’s movie about AIDS , “Philadelphia,” with Hanks and Denzel Washington.
It is the most visible development to come out of strategy sessions held by pay-TV networks as they adjust to a new regulatory environment.
“I’m planning to charge my subscribers more money for HBO and Showtime later this year for a simple reason: the Cable Act of 1992 does not regulate the pay-TV category,” says one cable operator, who requested anonymity because he hasn’t talked to the networks yet. “And I know a lot of other cable operators who’re going to do the same thing.”
Indeed, cable systems may need the short-term boost from jacked-up pay-cable rates because Federal Communications Commission guidelines will force most operators to roll back the prices they charge subscribers for tiers of ad-supported networks like ESPN, CNN, USA and Discovery.
Although Showtime is fully aware that it’s about to suffer some unwelcome rate hikes, the network is not sitting back.
Mac Lipscomb, senior VP of corporate affairs for Showtime Networks, says the company’s marketing people have cobbled together a plan that showers incentives on cable operators who add new subscribers by, in effect, lowering the cost of Showtime and sister nets the Movie Channel and Flix.
“With all the confusion in the marketplace, and cable operators scrambling to come up with new revenues to offset rate rollbacks,” Lipscomb says, “the last thing anybody needs is to drive subscribers away by charging them too much money for the premium channels.”
An Encore performance
Encore, a minipay network, has cooked up the most elaborate scheme so far to adapt to the new FCC rules — a multiplexing of its signal into six additional networks of movies from the ’60s, ’70s and ’80s.
Each of thenets will focus on a genre (Westerns, mysteries, action/adventure, etc.), and a seventh will highlight theatricals from a new five-year output deal Encore has struck with Universal. (The U deal kicks off later this year with “Scent of a Woman” and “Lorenzo’s Oil.”)
John Sie, chairman of Encore, says, “We’ll be able to create our own seven-channel tier, which might cost the subscriber only $ 6 for the whole package and which will be totally unregulated.”
Sie cites FCC chairman James H. Quello, who referred to Encore’s “creative response to the Cable Act” in a speech earlier this month; Quello said the network’s “per-channel service” should “exempt” the package from rate regulation because the channels will also be available a la carte.
The new regulations have had the least effect on the biggest pay-cable network, HBO. Its pricing philosophy springs from the industry perception that HBO is far ahead of Showtime in the theatrical-movie flow it can tap into for its programming lineup.
HBO’s exclusive deals are with its sister company Warner Bros. and with Paramount and 20th Century Fox and sources say HBO is negotiating to renew its output arrangement with Columbia.
By contrast, Showtime has TriStar, Touchstone and Hollywood Pictures. Unlike HBO, Showtime tends to rely more on boutique companies like Castle Rock — which , while retaining pay-TV rights, distributes such movies as “A Few Good Man” and the forthcoming Clint Eastwood melodrama “In the Line of Fire” through Columbia.
“We really don’t want to see operators raise prices,” says John Billock, exec VP of sales and marketing for HBO. “But we could sustain small and sensible rate increases.”
The operators that are planning to hike HBO’s retail price, he continues, “seem to me to be almost apologetic about it. I don’t see them going crazy and pigging out at the trough because they don’t want to lose HBO subscribers (through exorbitant prices) any more than we do.”