Showtime Networks Inc.

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Showtime Networks Inc.

founded: 1976

Contact Information:

headquarters: 1633 broadway
new york, ny 10019 phone: (212)708-1600 email: [email protected] url: http://www.showtimeonline.com

OVERVIEW

Showtime Networks Inc. is one of the country's leading premium television networks, featuring the first television airings of a number of successful theatrical movies as well as original films and live sporting events. Premium networks such as Showtime are usually available only through a monthly fee above and beyond the cost of "basic cable," and they offer viewers first-run movies and other entertainment without commercials. Showtime Networks owns the premium television channels Showtime, The Movie Channel, and Flix. It also has a partial stake in the Sundance Channel and All News Channel, and it has a Spanish network, Showtime en Espanol.

Showtime has exclusive movie contracts with some of the world's leading film production studios, such as TriStar, Castle Rock, PolyGram, and Metro-Goldwyn-Mayer (MGM), giving Showtime access to a wide range of new theatrical movies. The company boasts that it provides its subscribers with more original films and series than any of the other premium networks. The company's "Showtime 3-Day Weekend" features theatrical movies every Friday and Saturday night and on Sunday night spotlights original movies and series. A number of Showtime's original films have been the recipients of lavish praise from critics. Some of these critically acclaimed films include: Bastard Out of Carolina; Mandela and de Klerk; In the Presence of Mine Enemies; Rescuers: Stories of Courage; Color of Justice; and Riot.

COMPANY FINANCES

As a wholly owned subsidiary of Viacom Inc., Showtime Networks does not independently report on its financial results. According to Viacom reports, Show-time Networks' operating income for 1997 totaled $105 million on revenue of $724 million. Operating revenue in 1996 totaled $501 million.

HISTORY

Just three days before the U.S. bicentennial celebrations on July 4, 1976, Showtime had its launch with a program featuring an unlikely mix of musical performers: Rod Stewart, Pink Floyd, and ABBA. Show-time merged with The Movie Channel in 1983. Their principal competition was the premium channel HBO.

At a time when television viewers had little more to choose from than the three networks and a handful of maverick satellite stations such as WTCG-17 from Atlanta (forerunner of the Turner empire), Showtime and HBO offered an exciting mix of first-run movies and high-quality entertainment. Viewers were willing to pay relatively high prices to maintain their subscriptions to these premium channels, although few subscribed to both. Hence it was a highly competitive market, made even more competitive in 1984, a year that saw an up-surge of VCR purchases across the United States. Suddenly the premium channels had a serious competitor in videocassettes.

Showtime responded to this challenge by signing more exclusive distribution deals with movie studios to ensure it would be the first to show such major movie releases as Who Framed Roger Rabbit? outside the theaters. It also produced more original programming, much of it highly noteworthy, such as the film Paris Trout, which starred Dennis Hopper and Barbara Hershey. Also, championship boxing matches proved to be a major draw, and in the mid-1990s the name most commonly associated with Showtime was not its owner (billionaire Sumner Redstone) but heavyweight boxer Mike Tyson.

The latter half of the 1990s was a busy period for Showtime. In 1996 the company negotiated a number of strategic alliances calculated to strengthen the appeal of the network's programming. Showtime Networks entered into a first-look agreement with Rastar Productions, under which Rastar would propose at least 15 new motion picture projects for joint development with Showtime. Showtime also negotiated an understanding with Phoenix Pictures under which Showtime Networks would acquire the exclusive U.S. premium television rights to as many as 40 motion pictures over a seven-year period. Under the agreement with Phoenix, Showtime agreed to acquire about 11 percent of the equity of Phoenix, marking the first time the network had made an equity stake in a film production company of this caliber. Showtime also reached an agreement with Tribeca Productions under which Tribeca (in which actor Robert De Niro is a principal) would submit film projects for development with Showtime over a two-year period, with Showtime committing to produce three of them.

STRATEGY

From the beginning, the strategy of the two competing premium networks, Showtime and HBO, was to offer their viewers the excitement of recently released movies, live sporting events, and headlining comedy acts—all in the comfort of their own homes. Previously, by the time movies made it to television they were usually several years old and had been chopped into segments to fit between commercial breaks, and some scenes and bits of dialogue had been removed to meet U.S. Federal Communications Commission (FCC) requirements regarding language, nudity, and violence.

Showtime and HBO changed all that, and for a few years they had the market all to themselves. However, the widespread availability of VCRs and videocassettes soon became a competitive factor, forcing Showtime to take new steps in order to offer something more. By signing exclusive distribution deals with movie companies, Showtime and HBO were able to guarantee their audiences a look at new motion pictures long before they made it to video.

FAST FACTS: About Showtime Networks Inc.

Ownership: Showtime Networks Inc. is a wholly owned subsidiary of Viacom Inc., a publicly owned company traded on the American Stock Exchange.

Ticker symbol: VIA

Officers: Matthew Blank, CEO; Arthur Cooper, CFO; Mark Greenburg, Dir. of Marketing

Employees: 750

Chief Competitors: As a leading contender in the premium television market, Showtime's primary competitors include: Bravo; Walt Disney; HBO; and Starz!.

Although both Showtime and HBO have invested millions of dollars in the production of original programming to help offer subscribers entertainment not available elsewhere, Showtime has been particularly aggressive in its campaign to increase both the quantity and quality of its original movies. To this end, Showtime announced in October 1996 that it was increasing its commitment to original programming while simultaneously "enhancing the programming mix" to include more series. This gave the cable network more hours of original programming than ever before. Among the most notable of these Showtime series have been The Outer Limits; Poltergeist: The Legacy; Stargate; and The Hunger.

In September 1994 Showtime launched Showtime en Espanol to reach the large Spanish-speaking market. In December 1996 it signed a deal with PrimeStar, a leading satellite provider, to include Showtime, Showtime 2, and the Sundance Channel in its 1997 lineup.

INFLUENCES

Showtime has been heavily influenced by the forces affecting its parent company, Viacom Inc., and by its competition: HBO, video rentals, and, to a lesser extent, other cable channels. When Viacom launched Showtime in 1976, it specifically intended it as a competitor to HBO in the then-underpopulated world of cable. Showtime scored an early coup when it closed a deal with the largest cable systems operator in the country, Teleprompter Corp., to distribute Showtime instead of HBO.

However, in the early 1980s Viacom turned its attention away from cable to radio and other entertainment. This proved to be a case of bad timing because it was during those very years that the VCR and videocassette explosion began to pose a serious challenge to pay-television. With videocassettes, people still had to wait months for new movies to become available, but that was better than waiting years for them to appear on television. Also, movies on video usually appeared in the same form as they had in the theaters. Thus, consumers could reasonably question why they should pay for Showtime and watch only the movies it offered when they could pay the same amount each month at the video store and select exactly what they wanted to watch.

As premium channels entered a period of decline in 1984, Viacom strengthened Showtime by pairing it with The Movie Channel. But the two still lagged far behind their competition. Whereas HBO was available on 5,000 of 5,800 U.S. cable systems, Showtime and/or The Movie Channel had distribution through only 2,700. In the year between March 1985 and March 1986, Showtime lost some 300,000 customers. It was then that Showtime began to move more aggressively to gain exclusive distribution rights for new films, for which it paid heavily. The movie companies saw the increased demand on Showtime's part and knew they could raise their prices, and Showtime had to spend more advertising money to let its customers know the lengths to which the network was going on their behalf.

During this period, when Viacom also had purchased MTV Networks, Sumner Redstone's National Amusements Inc. bought Viacom. Redstone, who made his money in the movie theater business and virtually created the concept of the multiplex or multi-screen theater, set about to change Showtime's fortunes. He assigned the task to Frank Biondi, a former executive at HBO, who brought in Winston Cox, also from HBO. Together they increased the network's marketing budget and obtained several valuable, exclusive distribution deals, particularly with Paramount and Disney.

In both 1986 and 1987 Showtime ran 6 of the 10 highest-grossing films of the year, and in 1992 it had its highest-rated program yet with the exclusive premiere of Arnold Schwarzenegger's blockbuster hit Terminator 2: Judgment Day. In spite of some setbacks, such as the failed launch of a comedy channel called HA! in 1989, Showtime's prospects continued to improve, due in part to a new emphasis on high-profile boxing matches and original programming.

CHRONOLOGY: Key Dates for Showtime Networks Inc.

1976:: Viacom launches Showtime
1983:: Merges with The Movie Channel
1984:: A huge surge of VCR purchases puts the premium cable networks in direct competition with video
1995:: Showtime signs a multi-year deal with former heavyweight champion Mike Tyson for exclusive rights to televise his fights
1996:: Enters into an agreement with Rastar Productions and Phoenix Pictures to produce pictures and secure television rights for Showtime
1998:: A campaign to reach veterans of the Gulf War in five key states is launched before the showing of a controversial documentary of Gulf War Syndrome

In 1995 Showtime signed a multi-year agreement with former heavyweight champion Mike Tyson, which gave the network exclusive rights to the pay-per-view exhibition of his fights through 1998. Tyson gave Showtime several huge successes with Tyson vs. McNeely: The Return of Mike Tyson, the second highest-grossing pay-per-view event in the network's history, and Tyson vs. Holy-field: Finally, its highest-grossing pay-per-view event.

The emphasis on original programming has continued, giving Showtime an opportunity to showcase entertainment products not available elsewhere. Showtime Networks has also continued to negotiate deals giving it exclusive premium television rights to theatrical films. In one unusual agreement, Showtime in 1998 acquired all U.S. distribution rights to Lolita, director Adrian Lyne's adaptation of the 1954 novel by Vladimir Nabokov. Under the agreement, Showcase and the Sun-dance Channel, of which Showtime Networks is a part owner, jointly premiered the film on their respective channels in August 1998. Showtime also was negotiating with several distributors about a post-Showtime theatrical release for the film.

PRODUCTS

Showtime Networks offers a variety of programs for its viewers. Showtime features theatrical releases, original movies and series (an increasing trend in the late 1990s), championship boxing matches, and other entertainment. Showtime 2 and Showtime 3 offer additional programming in certain markets, and Showtime en Espanol is a Spanish version of Showtime.

In addition, The Movie Channel is a 24-hour premium service featuring nothing but movies, including two originals every month. Flix capitalizes on the nostalgia industry with popular movies from the 1960s, 1970s, and 1980s, as well as the 1990s. The All News Channel, a CNN competitor, is a 24-hour service featuring news, weather, sports, business, and entertainment updates. The Sundance Channel—jointly owned by actor/director Robert Redford, PolyGram Filmed Entertainment, and Showtime—offers an unusual mix of hard-to-find current, independent feature films; documentaries; foreign films; film shorts; and animation.

Among Showtime's successful motion pictures and specials are Bastard Out of Carolina; Mandela and de Klerk; In the Presence of Mine Enemies; Paris Trout; and Hearts of Darkness: A Filmmaker's Apocalypse, which is about the making of Francis Ford Coppola's 1979 film epic, Apocalypse Now.

In June 1998 Showtime premiered Armistead Maupin's More Tales of the City, the eagerly awaited sequel to Armistead Maupin's Tales of the City, which originally aired on PBS. The six-hour miniseries featured the return of original cast members William Campbell, Olympia Dukakis, Barbara Garrick, Thomas Gibson, and Laura Linney. Showtime, along with Channel 4 Television and Working Title Television/Propaganda Films, sponsored the production of this sequel by Montreal-based Productions La Fete.

CORPORATE CITIZENSHIP

In March 1995 Showtime led a "Voices Against Violence" initiative to educate viewers on domestic violence. During that month it aired an original motion picture, The Tin Soldier, which dealt with the subject of peer pressure.

In the spring of 1998, in advance of its premiere of Thanks of a Grateful Nation, a controversial exploration of Gulf War Syndrome, Showtime launched a grassroots campaign to reach veterans in five key states. Town meetings were held in Dallas, Hartford, Atlanta, Detroit, and San Francisco. Veterans, medical professionals, journalists, family members, and the producers of the miniseries served as panelists during the town meetings, which followed advance screenings of the miniseries. Admission to all the regional events was free.

SOURCES OF INFORMATION

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