Movie studio demands cause of proposed terms of PPV deal with telcos: Shaw

Shaw Communications Inc. blames the Hollywood studios for the different terms offered for the provision of its pay-per-view (PPV) service to Manitoba Telecom Services Inc. (MTS) and SaskTel than to cable operators. As a result of demands for minimum guarantees and an increased share of the revenue pie by the content suppliers, Shaw states that existing PPV agreements with customers will be changed when they expire to reflect these new conditions. Shaw tells the CRTC that the disagreement over providing PPV services to MTS and SaskTel is simply an inability to come to "business terms." Both SaskTel and MTS have complained that Shaw, the licensed PPV operator for Western Canada, was asking for minimum guarantees, and offering them lower revenue splits than for its affiliated cablecos (CCR, March 27/03). In reply comments to the CRTC, Shaw notes that it is not in its economic interests to deny access to its PPV service, while pointing out that in the past "the CRTC has chosen not to regulate the commercial aspects of PPV services such as revenue splits." Shaw also says that the telcos have the option of dealing with Bell ExpressVu LP, which was granted a national terrestrial general interest PPV licence in Decision 2000-737. Shaw’s terms "reflect the demands of rights holders for greater revenue participation, and their concerns that DSL is a separate right to which a premium be applied to DSL technology," Shaw’s senior VP of corporate and regulatory affairs Ken Stein writes in response to the complaints. "Under the particular circumstances, Shaw submits that it has not conferred an undue preference on Shaw and has not subjected MTS to an undue disadvantage…," Stein states in Shaw’s February 12 response to the MTS complaint. Shaw says that the existing supply arrangements do not include DSL rights, and that the studios are separating those rights out and attaching a premium to them. "This is because they view DSL technology as new and because they have concerns for the security of signals distributed via DSL technology," he writes. A copy of a portion of the summary of commercial terms worked out between Shaw and a Hollywood studio – the name of which has not been included on the public record – states: "Non-exclusive rights to exhibit Licensed Product on PPV/VOD basis via licensee’s PPV/VOD service as described below. Transmission shall be via cable …" The premium being demanded for DSL as well as an aggressive drive by the studios to generate more revenue from PPV and video-on-demand (VOD) have resulted in a reconfiguring of the revenue split and the introduction of the minimum guarantee, Shaw states. The studios are demanding a higher percentage of the revenue split because of increasing production costs; concern for digital piracy and peer-to-peer networking; the increasing demand, attraction and value of movie content; and a desire by the studios to cut out the middleman and offer content directly to the public via their own outlets, including the Internet, Shaw notes in its response. Shaw adds that "these richer terms (for the studios) will be reflected in all our renewal agreements with existing affiliates." Shaw’s response to the CRTC states, "Consequently, under the circumstances, Shaw considers that the revenue split to MTS is fair and reasonable. The revenue split formula presented to MTS provides them a guarantee of 20% of the revenue regardless of the cost to Shaw for the product with a particular studio. In many cases Shaw will potentially receive a smaller net revenue split than will MTS." Shaw also argues that, in a drive to increase their revenues from output agreements, the studios have also begun asking for "significant" minimum revenue guarantees. "In order to continue to secure product for our PPV service we are being required to agree to minimum guarantee payments," Shaw writes.

Movie studio demands cause of proposed terms of PPV deal with telcos: Shaw

News | 04/10/2003 4:00 am EDT

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