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Inside Move: HBO Home Run

Paybox hits pay dirt with U picture deal

The details of HBO’s recent deal with Universal Pictures may be murky, but the paybox has certainly bought bragging rights.

It’s one of the weirdest movie deals in the history of pay TV. HBO has bought at least 50% of the theatrical movies distributed by Universal Pictures in the first year of an eight-year deal to kick off with the titles released by U to theaters in 2003.

Whether that 50% continues for each of the next seven years, or HBO ends up buying Universal’s entire output through 2011, is still up in the air.

HBO decided to rush an announcement of the transaction on Jan. 31 because the network’s prexy Jeff Bewkeswas making a presentation to security analysts and wanted to brag.

The boast achieved the desired effect of surprising the analysts, who like everyone else in the industry figured that the incumbent Universal pay TV outlet, John Malone’s Starz, would renew the output deal.

While HBO basked in the perception of primacy as the No. 1 pay channel for fresh theatrical movies, spokesmen for both Universal and Starz were planting the impression that Starz could still continue its relationship with U by securing pay TV rights to the other 50% of the titles that are not part of the HBO deal.

It gets even more complicated.

U held back 50% of its titles for a possible Starz deal because Starz recently aced out HBO for the Columbia Pictures output. HBO lost out to Starz because it said no to allowing Columbia to experiment with getting pay-per-view theatricals to the public through streaming video on everything from desktop computers to PalmPilots. Starz agreed, even though the experiments would in effect erase the pay TV exclusivity.

HBO is still not permitting any PPV experiments in its deal with Universal.

So consider the HBO-Universal announcement part one of what could be a landscape-altering shift in the way people watch movies in their homes.