New channel Epix hopes to shake up premium cable with hipper fare

Showtime's challenge, then, is to find ways to pack its schedule — as well as its 10 related services, including The Movie Channel and Flix — with shows that can approach the popularity of the 15,000 films in the libraries of Paramount, Lionsgate and MGM. It won't be able to show Paramount, Lionsgate and MGM films released after Jan. 1, including the upcoming Star Trek, G.I. Joe and an updated version of Fame.

The network will continue to have its original series Weeds, which is produced by Lionsgate.

Showtime declined to discuss its plans, or Epix.

Greenberg says there's no chance of a reconciliation. "That opportunity has moved on," he says. The studios "are committed to doing this. Epix will launch." MTV Networks, Viacom's basic cable division, is already out trying to strike deals with cable, satellite and phone video providers.

Greenberg wants operators to include Epix in their packages of digital, movie or HD channels — it wouldn't appear as a separate charge on customers' bills the way premium services usually do. He'll sweeten the deal by making the channel's movies and shows available to their video-on-demand services.

He's asking companies to pay $1.50 a month for every subscriber who can see Epix. That's about 50 cents more than operators typically pay for ad-supported basic channels such as TNT, but far less than they provide to sports services such as ESPN, which costs about $3.65.

But Epix may have to settle for less than it wants.

"It's a difficult environment these days, and everyone's looking at their costs," says Derek Chang, DirecTV's executive vice president for content, strategy and development. "We continue to have conversations with these guys. We're always willing to listen to what they say. They appear to be flexible."

Greenberg says deals will start to come as people learn more about what Epix has to offer. "We're in some meaningful discussions right now," he says. "I'm hoping that we'll be able to announce something in the spring."

The big question is how low he can go on the price. It may be difficult for Epix to accept a lot less.

Impact of cable channel payments

Payments from premium cable channels can have a big impact on a film's bottom line — and that's critically important to A-list actors and directors who often collect a share of a film's profits.

"If the payments (films receive from Epix) are lower than other networks', it might lead profit participants to take their films to other studios" that have deals with HBO, Showtime or Starz, says Deana Myers, analyst at research firm SNL Kagan.

Viacom and Lionsgate investors also might rebel if Epix drains too much cash. Viacom shares have fallen about 65% from their 52-week high as the company has grappled with the soft ad market, weakening DVD sales and disappointing ratings at MTV. Lionsgate is down about 59%.

Greenberg says he expects Epix to break even in about four years, but, "We keep re-evaluating that depending on the economy."

Beyond discussions about price, Epix will have to show that its movies will still seem special to viewers who have growing opportunities to see them on DVD and TV or Internet video-on-demand services before they make it to premium channels.

"The day of pay services suffering from missing big movies is over," says former HBO chief Michael Fuchs.

Others, though, say audiences will still find films exciting, if they're properly promoted.

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