2ND UPDATE: This joint premium TV channel announced today by Viacom, Paramount (including Paramount Vantage), MGM, and Lionsgate, in the words of one insider to me, "royally screws" Les Moonves. Because his CBS Inc's Showtime had been in protracted discussions to renew its theatrical-output deals with Paramount, MGM and Lionsgate. I'd been told that the negotiations between Moonves on one side, and Viacom CEO Philippe Dauman and Paramount boss Brad Grey on the other, had not been going well in recent months. The reason was that Moonves wanted to drastically cut the price for Paramount pics, arguing that "the pay channel world isn't what it used to be" and the value of movies on moonves-cbs.jpgpay TV has decreased while the importance of hot new scripted original series have increased. I'm told that, as the bargaining dragged on, the Paramount/Viacom camp, once optimistic that it would all work out, lost patience with Moonves' "hard line" and resented being lowballed. Now it looks like Les over-negotiated because Paramount, MGM and Lionsgate have found refuge thanks to Viacom. This new premium TV channel by Viacom, Paramount, MGM and Lionsgate is that old Hollywood maxim at work: Don't get mad. Get even.

"I don't think Les ever believed that we would form our own channel. Certainly we never discussed it," an insider tells me. "But then it became clear that the numbers on an economic basis makes more sense for us to own the channel and have equity. We would rather control our own destiny. So we turned a negative into a positive."

Another source told me: "Les is royally screwed. There are no studios left not spoken for. Now this new venture is a competitor to produce original programming, too. And remember that Lionsgate also produces Weeds, one of Showtime's big series." Making the situation even more awkward is that Moonves is good friends with both MGM chief Harry Sloan and Lionsgate boss Jon Feltheimer. But then half the fun of being a Hollywood mogul is being able to shiv your pals. Or your corporate colleagues.

Back in 2005 when Viacom's assets were split, Moonves took over CBS Inc including the network, the Pay TV and the TV production, radio and outdoor advertising -- while Dauman took over bigger Viacom with its high-growth cable networks and movie studio. At first CBS stock was outperforming Viacom, which finally in 2007 had a better year than CBS. (But Dauman made 56% less than Moonves last year.) Then there's parent company Viacom chairman Sumner Redstone who keeps pitting Moonves against Dauman, and that's exactly what is happening with today's announcement. After all, Redstone gave Moonves the go-ahead to compete with Viacom/Paramount by allowing CBS Inc to start its own movie production division, albeit one that Les insists will make midsize films and not big budget blockbusters. So why shouldn't turnabout be fair play? In fact, Moonves recently told reporters, "If Paramount wants to get into the television business, we'd be very respectful of that." Hmm, let's see.

UPDATE: I have some more details not in the news release below. I'm told it's still "wide open" whether the new premium TV channel will be pay TV or basic cable. "For us, that's a decision that can be made a bit down the road because we don't go on until 2009," an insider explains. "It'll be decided in the next short while." In the next week or two, the joint venture will announce its distribution partners on satellite, cable and telco, as well as who'll be running the channel. Viacom/Paramount has a huge equity position in the new channel, not just because of the size and quality of its content but also because of Viacom's immense clout in the cable business what with 133 channels. MGM and Lionsgate are much smaller equity partners. I'm told no upfront cash is changing hands. At a time when distribution is rapidly changing and Big Media is colluding more and more as the field of competition gets smaller and smaller, I agree with the opinion of this insider, "I do think it's a game-changer." Press release below:
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NEW YORK, April 20, 2008 – Viacom Inc. (NYSE: VIA and VIA.B), its Paramount Pictures unit, Metro-Goldwyn-Mayer Studios Inc. (MGM) and Lionsgate (NYSE: LGF) have formed a joint venture that creates a next-generation premium television channel and video on demand service that combines new and classic feature film output and original television series of five leading studios. The new premium channel, which will launch in the fall of 2009, was announced jointly today by Philippe Dauman, President and Chief Executive Officer of Viacom Inc.; Brad Grey, Chairman and Chief Executive Officer of Paramount Pictures; Harry E. Sloan, Chairman and CEO, Metro-Goldwyn-Mayer Studios Inc. (MGM); and Jon Feltheimer, Co-Chairman and Chief Executive Officer of Lionsgate.

The new venture will have access to Paramount and Paramount Vantage titles released theatrically on or after January 1, 2008 and MGM, United Artists and Lionsgate titles released theatrically on or after January 1, 2009. The venture’s programming slate will have exclusive access during the pay television window to such recent and highly anticipated films as Iron Man, Star Trek, Pink Panther 2, Cloverfield, The Curious Case of Benjamin Button, Shutter Island, GI Joe, Love Guru, and Valkyrie, along with many others currently in production including planned new installments of Robocop and Outer Limits.

In addition, the new venture will have access to motion picture titles spanning the vast libraries of the five studios, which libraries include Braveheart, Forrest Gump and the Mission: Impossible, The Godfather and Star Trek franchises from Paramount; the James Bond, Pink Panther and Rocky franchises from MGM; and Dirty Dancing, Reservoir Dogs, Crash, Monster's Ball, the Saw franchise, the Tyler Perry catalogue and The Blair Witch Project from Lionsgate. The new venture will also feature new original television series created by the five studios.

Viacom will provide operational support to the venture, including marketing and affiliate services through its MTV Networks division.

Dauman said: “This venture has the potential to be a game changer for the industry. We are building an innovative service that will use traditional and new digital distribution technologies to bring great film and television entertainment directly to the consumer. By combining the output of Paramount with MGM and Lionsgate, two film and television powerhouses, we are creating a premium film and television programming brand with unique flexibility to bring consumers the very best blockbuster movies and innovative TV series.

“We are extremely pleased to be in business with MGM and Lionsgate in this exciting new venture which will provide our companies with a strong presence in the premium TV marketplace well into the future.”

Grey said, “For close to a century, Paramount has produced and distributed some of America's best-known and beloved films -- a tradition that continues today, with an outstanding lineup set through 2009. That commitment to great entertainment is matched by Paramount's focus on creating new and innovative platforms that offer more access and flexibility to consumers. We look forward to launching this historic premium entertainment service with a strong slate that includes new releases like Cloverfield, Iron Man, and Star Trek alongside Paramount’s legendary library.”

Sloan said, “At MGM, we are very pleased to have found two partners that share our vision of providing first-run movies and premium-quality original television programming across linear and digital platforms in a new way. Our approach delivers unique flexibility for program distributors as well as consumer options that will provide the highest quality entertainment. The newly revitalized MGM, under the direction of Mary Parent, Chairman, Worldwide Motion Picture Group, is preparing to bring top projects to the venture including the newly acquired Robert Ludlum’s The Maratese Circle, which will star Denzel Washington as well as franchised movies based on James Bond, Pink Panther, and Thomas Crown.”

Feltheimer said, "We are excited to be working with two of the most respected studios in the business to start a new venture which marshals the historic legacy of the past, the filmed entertainment leadership of the present and a vision for the digital marketplace of the future. Our prestigious and prolific libraries, diverse and commercially powerful new feature film releases and enormous television series development expertise combine to make this a formidable and uniquely compelling entertainment service from day one. This is a true next-generation premium content offering for the consumer.”