Epix lands first carriage deal

FiOS TV in five-year pact; Epix boss discusses originals

NEW YORK -- Epix has finally reached its first carriage deal. The premium video service will be available on Verizon Communications' FiOS TV across a range of platforms -- from linear TV channels in standard and high definition to broadband, VOD and Verizon's VCast mobile service.

But Wall Street observers had mixed reactions. Many seemed underwhelmed by Tuesday's news and want to see more evidence that the venture from Viacom, Lionsgate and MGM will make enough money and get carriage from the biggest distributors.

Philippe Dauman, president and CEO of Viacom, the lead investor in Epix, announced the five-year Verizon pact during his company's earnings call, promising more distribution deals "in the near future." And Epix president Mark Greenberg told THR he expects additional announcements before the linear network's October launch.

An earlier idea to potentially offer Epix exclusively to one company or one type of distributor is off the table.

The Verizon deal "gets the ball rolling for other deals," said Miller Tabak analyst David Joyce, who estimates Epix could get a modest monthly fee of 25 cents per subscriber from Verizon. The companies didn't provide financial details. FiOS TV now has about 2.5 million users.

Wall Street observers are used to lack of such details, but they seemed more concerned than usual in the case of Epix.

RBC Capital Markets analyst David Bank called the FiOS announcement "pretty much a non-event," arguing that a deal with a big distributor, such as cable giant Comcast, is needed to make Epix a serious player.

Piper Jaffray analyst James Marsh said he was "still unclear about subscriber economics, but it seems like the process is moving forward" with the first deal.

Dauman, though, said he's confident that Epix will get broad distribution, and he highlighted its cost advantages. "Because ... we are operating more cost-effectively than the competitors, we really don't have all that high a hurdle" to break even, he said.

However, according to SNL Kagan, CBS Corp.'s Showtime paid the three studios behind Epix more than $300 million for product in 2008, cash they no longer will receive.

Asked if Epix still expects to break even within 18 months of launch, Greenberg told THR: "We are fairly confident that we are still on the right trajectory."

What also remained unclear Tuesday is whether Epix will be mainly a premium channel offer or something else. The Verizon deal gives the telecom giant flexibility to offer Epix in various forms -- including a la carte and in bundles with its broadband service. At launch, Epix will also have 300 hours of content available via subscription VOD and on its Web site. The two firms also plan to create a mobile Epix offer that they can market to Verizon's 4 million VCast subscribers.

Epix does not have control over what Verizon will charge its customers, but a spokeswoman said Epix has created a rate card that provides incentives for Verizon not to charge customers based on subscriptions to each individual platform.

Greenberg wasn't ready to unveil major programming plans Tuesday beyond recent blockbusters from all studios involved. But he said "we have concepts in development with all" three owner studios.

Lionsgate project "Tough Trade," with "Weeds" maven Jenji Kohan as showrunner, is on tap for the first half of next year. A couple of other originals also seem likely for 2010. The "Atlas Shrugged" miniseries with Charlize Theron has not been greenlighted, but Greenberg said both sides want to do it as long as the script is right.

Epix also is planning live event specials in the music and comedy space this fall.
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