This story was written by Staci D. Kramer.
One sign that a company is ultra serious about a new venture: when the CEO of a major media company does press calls on a Sunday afternoon. Viacom (NYSE: VIA) CEO Philippe Dauman was doing just that today, as he explained the surprising decision to band together with Lionsgate and MGM for the new studio JV announced today. Most of the details are either undecided or undisclosed but the new venture will emphasize online distribution in addition to premium TV and VOD. The premium world just tilted. Read on for Dauman's explanation of how, why and what's to come:
On how online factors in: "As we go forward and make further announcements, you will see that this will be oriented toward the consumer. It will also meet the needs of varying distributors and take advantage of online distribution...innovative both in presenting the content and in distributing it. Under the traditional deals there are a lot of restrictions on what you can do and, by controlling our own destiny, studios and programmersbecause it is our ambition to develop premium television contenthave a lot more flexibility on what we can do during that window."
On distribution partners: Dauman isn't providing details and says the desire to keep this quiet constrained the JV from going too wide in preliminary discussions. "We're looking at a lot of things. It's a mixture of seeing what the possibilities are. ... As we talk to people, it's certainly a very interesting proposition for them ... we look at what the distribution is and the economics of the venture. This is all about creating value. We've had good discussion with a few select people so far. We'll obviously have more. We've had enough conversation to make us comfortable that we will have pretty interesting distribution both linear and online."
On Redstone, Moonves and Showtime: The siblings created by the split of old Viacom into today's version and CBS (NYSE: CBS) have been increasingly competitive. This move, though, strikes at Showtime's heart by depriving it of core exclusive contentParamount now, then MGM and Lionsgateand setting up a serious competitor at the same time. "We look at it more as pursuing our strategy. If we do our job well, we're creating more value for our shareholders. .... As we look at our company today, we are a pure content company. We have many, many branded services. We're very good at building brands and this was a unique opportunity at this point in time and one not easily replicated. It's not very often you get to start a distinctive service today." It fits Dauman's strategy: "drive our brands, create new brands and distribute them everywhere we can, monetize our content in innovative ways." He adds: "I' like this because it is a game changer in a category that has been done the say way for long, long time. "
But what about Redstone, Moonves and Showtime? "Sumner's attitude is very cleareach company has a responsibility to its shareholders and the responsibility and right to drive its own strategy. He's said so publiclyat the time of the CBS Films announcement, for example. I wish CBS well. Leslie is my friend. What I need to do is to maximize value for our shareholders
as he should for is and Sumner is quite comfortable with that."
On the investment: No details about amounts but Viacom is the lead investor. Dauman says MGM and Lionsgate are substantial equity investors." As for taking in other studios as equity partners down the road, that's not even an option for years because of the length of the other contracts.
On possibilities beyond premium: Dauman kept the emphasis on premium content from theatrical releases or created for the new service but said th JV will have its own CEO, its own structure. "There may be some other programming that might be interesting to the venture ... we'll see how the service develops. Our ambition is to be the best service in this category out there."
On the meaning of premium: In the pay universe, premium usually means subscriptions or SVOD but Dauman isn't committing to that. He's more intent on using "premium" to define the kind of content the JV is planning, referring to Paramount CEO Brad Grey's former life producing The Sopranos, Lionsgate's production of Weeds and MGM's history in that area. "You bring these three together and, from a content standpoint, you have really huge capabilities." He added later, "It is high-end product. It is expensive product."
On the timeline: Talk about fast tracks. Dauman's description: "The way the so-called pay-television output agreements go, they are very long-term in nature and apart from these three studios there will not be availability for many years to come. Our deal covered movies released through the end of last year and we started to think what are all the alternativesobviously an extension of our current deal or thinking about something else." Dauman says he had meetings "over the past several weeks" with Jon Feltheimer (Lionsgate) and Harry Sloan (MGM). "They're one year behind us in their pay contracts and the more we talked about it, the more excited we got by the possibilities. We all got together in my office in New York during the course of the week, we got our teams together and we moved things forward and got it concluded over the weekend. Once you come up with a great idea, you move forward and you get it done. It's a great partnership, very compatible with content-oriented goals and the benefit of the tremendous infrastructure and capabilities Viacom has in terms of marketing. ...It was a unique opportunity, one that wasn't going to be replicated probably during the rest of the careers of all of us ... it was a great moment in time with all of the changes taking place in distribution."
By Staci D. Kramer