Weinstein puts out for this output deal

Showtime will receive cash in pay TV twist

The Weinstein Co. is forging an exclusive, seven-year pay TV output deal with Showtime. And in an unusual twist, the indie distributor apparently will make an advance "bonus" payment of as much as $100 million to the pay cable channel.

As in other pay TV deals, Showtime would parcel out payments to the Weinsteins according to the performance of the various films at the domestic boxoffice — minus the prepayment, which is essentially a discount on the amount Showtime will owe the supplier.

Declining to discuss the financial terms of the deal, the Weinstein Co. co-chief Harvey Weinstein called the suggestion of a prepayment clause "rumor and innuendo" but added that in his opinion, the deal is "a game-changer" for his company.

"The whole purpose of these discussions has been to make sure we have the resources available to keep producing new and original programming," Showtime chairman and CEO Matt Blank said. "Theatrical films are still very important, though the price-value relationship was out of whack. Fully loaded, the (Weinstein) deal will cost us half of what we were paying historically for films."

Blank declined comment on financial specifics of the deal.

"This (prepayment) would be new," Miller Tabak analyst David Joyce said. "This is the film studio version of reverse compensation (whereby TV stations pay networks for their affiliation and the programming that the net supplies.)"

Other industry observers likened the Weinstein Co.'s payment to Showtime as a "deposit," subject to a "rebate" that protects Showtime in the event that the Weinstein Co. doesn't delivered the number or quality of films promised.

The pact, which begins in 2009, will cover 95 films, including such upcoming titles as Quentin Tarantino's "Inglorious Bastards" and Rob Marshall's "Nine." It also encompasses such Dimension Films titles as "Youth in Revolt" and "6 Billion Dollar Man."

The deal is advantageous to Showtime because it will be getting the films at such significantly lower license fees than it would have paid for similar output deals in the past.

As to whether the pay cabler will look to forge similar deals with other movie suppliers, Blank suggested that times definitely have changed in the pay TV business.

"Every supplier is different, but this deal certainly makes a statement about what an appropriate market value for feature films is today for Showtime," he said.

Blank emphasized that the network is planning to ramp up its investment in original programming.

" 'Weeds,' 'Californication,' 'Dexter' and all that great stuff out there is what's driving the Showtime business today," he said, adding that feature films still are a significant part of the programming mix, comprising 74% of the schedule.

Combined with the films the network will get from sibling CBS Films, Showtime will be getting about 130 movies during the course of the Weinstein Co. deal, Blank said, adding that "there are more deals to come." He declined specifics about any other suppliers that Showtime might be talking with.

Finding a pay TV outlet of its own has been a particular challenge for the almost 3-year-old Weinstein Co. It initially struck a theatrical distribution pact with MGM in order to have access to the Lion's own long-standing Showtime output deal. But both the Weinstein Co.'s deal with MGM and MGM's deal with CBS-owned Showtime are up on Jan. 31.

The Lion is joining forces with Viacom's Paramount and with Lionsgate to create yet another possibly ad-supported pay TV service — partially as a result of the more tight-fisted terms that Showtime was trying to exact from them. Apparently the Weinstein Co. was having conversations with the Paramount service as late as Sunday but concluded that the fledgling service's lack of carriage deals so far was a stumbling block.

Since the Paramount trio went off on their own, Showtime has been scurrying for new movie suppliers, which inevitably have to be mostly indies because the other Hollywood majors are tied up in multiyear deals with rival pay TV outlets HBO and Starz.

The Showtime deal could make sense for the Weinstein Co. as long as the films it covers perform "reasonably well," Miller Tabak's Joyce added. "I imagine TWC will still eventually get back more than any upfront payment they might have paid," he said.

The deal follows a string of Weinstein Co. movies, many of which have failed to perform at the boxoffice. Although the Weinstein Co. is moving ahead with such high-profile titles as "Nine" and "Inglorious Bastards," it has been seeking partners for production financing just as it has been sharing the costs of key film acquisitions.

"The Weinsteins could look at this deal as a way of getting money to cover their production budgets," said Deana Myers, senior analyst for SNL Kagan. "These days the pay window portion of a film is part of the business model."

Showtime and the Weinstein Co. have been talking for about six months but more seriously for the past two, Blank said.

Gregg Goldstein reported from New York; Kimberly Nordyke reported from Los Angeles.
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