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Paramount's Showtime

Iron_man_flying If you're like me, a single question bounced between your ears when you read that Paramount, MGM and Lionsgate had decided to start their own premium movie channel, in competition with Showtime, HBO and Starz: "What were they thinking?" In this morning's LA Times, Claudia Eller and Meg James (the Biz section reporters who cover the studios and the networks, respectively) provide some answers. Although the move still smacks of an effort to wrest more dollars from Showtime, the piece helps illuminate some of the logic behind the effort.

Simply put, breaking away from Showtime would let the studios make their content available in more places and under more flexible terms. The pay TV window has been a reliable moneymaker for the studios, which is always a nice thing to have in a business as risky as film and TV production. Yet as they say on Wall Street, past performance is no guarantee of future results. And in the Internet era, any business model that relies on rigid release windows is suspect.

The Net subjects Hollywood (and pay TV) to a double whammy. Consumers have far more entertainment options, and studios can't stop them from watching what they want, when they want. By the time a movie reaches the pay TV window, almost everyone interested has already seen it at the multiplex, rented it at Blockbuster, bought the DVD at Costco or (gasp!) streamed or downloaded it from one of the many sources online, authorized or not. That's why Showtime, like HBO, is investing so much in original programming.

Meanwhile, cable operators' ability to charge consumers ever-increasing rates, and pay ever-increasing fees to content providers, is becoming increasingly tenuous. AT&T and Verizon have raised the competitive heat, and networks have started undermining the demand for cable by making all of their programming available for free online. As soon as there's a simple and inexpensive way to bring the Internet to TV sets, those online sources become far more compelling. So, too, are they helped by the steady expansion in bandwidth to the home and the improving high-def delivery systems. Do you really need to pay for cable or even TiVo when Hulu is free and in HD?

Against that backdrop, the idea of starting a new pay TV channel seems nutty. Studios disentangling themselves from middlemen and their exclusive windows, on the other hand,  seems far-sighted. The more studios can satisfy the public craving for the entertainment they want whenever, wherever they want it, the more chance they'll have to thrive despite the disruptive forces of broadband.

The photo of Iron Man is courtesy of the film's website. Such images are trademarked by Marvel Characters Inc. The film's copyright, meanwhile, is held by Paramount Pictures, and its success or failure rests on Robert Downey Jr.'s shoulders. Personally, I would have paid $10 to see the trailer.


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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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