Studios Invested About $34 Million in Premium Movie Channel JV; Could Reach $150 Million
This story was written by Rafat Ali.
So much has been written about the new premium movie channel supposed to be launched jointly by Viacom (NYSE: VIA) with MGM, Lionsgate and its own Paramount Pictures in the fall of 2009, including the fact that it may have run into some trouble on distribution side, with *Comcast* opting out. Now, some numbers, unearthed in a 10-Q filing by Lionsgate for its Q308 earnings: that it invested $8.6 million as of September 30, 2008, in its 28.57 percent share of investment in the JV (MGM owns the same amount, while Viacom owns 10 percent more for helping market the channel via MTV Networks). Which means that if the amount invested is proportional to the stake owned, then the total money invested for now is about $34 million.
Lionsgate also reveals that it has a mandatory commitment of $31.4 million increasing to $42.9 million if certain performance targets are achieved. Which again if you assume the division is proportional, means that the total investment from all parties over the defined lifetime is certainly $100 million, and could reach as much as $150 million depending on performance. It remains to be seen if the three offer up some equity, and hence the investment option, to another distribution or content partner. Either way, they may have to do a rethink on the channel, based on the economic situation and the monetary situation of the studios themselves. Also, the secular trend of movie viewership declines on existing premium movie channels like HBO and Showtime should give them a pause. And then, of course, other online efforts that all of these companies are involved in, including Hulu, Joost (Viacom is an investor) and partnerships with YouTube.
By Rafat Ali