The economy is in tatters. People are losing their jobs by the hundreds of thousands. The No. 4 cable operator, Charter Communications, has filed for Chapter 11 bankruptcy protection. And television service providers across the board continue to grapple with the national transition to digital and high-definition TV.
In other words, this is a lousy time to launch a cable channel.
But that doesn't seem to bother Hollywood powers Viacom via (which owns Paramount), Lionsgate lgf and Metro-Goldwyn-Mayer. They're defying all odds to launch a bold service, called Epix, that hopes to break into the premium TV business long dominated by HBO, Showtime and Starz.
If you think it sounds crazy, you've got lots of company. Epix is a "mistake" that "will fail to get off the ground," says one of the channel's fiercest critics, Pali Research analyst Richard Greenfield.
No one has agreed yet to carry it, and Credit Suisse analyst Spencer Wang said in a recent report that he found "little interest" among the cable, satellite and phone video operators with whom he spoke.
Yet Epix President Mark Greenberg says the skeptics will be in for a surprise in May, when the service begins to offer some video features on the Internet and then in October when the TV channel makes its debut.
"We have great entertainment" from the three studios, which accounted for about 25% of all ticket sales in 2008, he says. "It's Indiana Jones. It's Iron Man. It's Cloverfield." Epix also will be the place to go for marathons featuring James Bond, Saw and the Pink Panther.
Greenberg hopes to attract lots of young adults by injecting marketing pizazz and some up-to-date technology tricks on an otherwise familiar programming package. The commercial-free service will include original TV series, concerts and movies that will air about nine months after they first appear in theaters — slightly earlier than other studios provide their films to premium channels.
Greenberg's efforts have already stunned some people who thought that the studios' talk about Epix was just a ploy to gain leverage in a bitter contract dispute with CBS-owned Showtime. Few imagined that billionaire Sumner Redstone would let two companies that he controls, Viacom and CBS, go to war with each other.
Yet Showtime's priorities have changed. It wants to boost the airtime it devotes to new series such as Dexter and Weeds and said last year that it would slash the $350 million a year it paid for the studios' movies beginning in 2009. Parent CBS has been under pressure, with its stock price down about 81% from its 52-week high, as it grapples with the soft ad market.
The studios said that they'd rather go it alone. "The wholesaler was taking his (cut), and the manufacturers weren't sure how their content was being used," Greenberg says.
His backers have pledged to invest $150 million to launch Epix. Viacom owns about 42.8% of the venture; the other two partners each have 28.6%.
That could jolt Showtime. It has deals to show films from The Weinstein Co., Summit Entertainment and the newly created CBS Films. But these are relatively small production companies that don't have deep libraries.
What would Showtime do?