Paramount Ends Showtime Deal To Start New Pay Channel

This a strange and significant story. It was inevitable that a studio would sever its pay-TV ties and start its own movie channel with a deep library and downloads, but I didn't think it would happen this soon and in this way. It's the wave of the future, and will accelerate the pace of change. So far the studios have been talking behind closed doors about how to take charge of their own delivery windows free from the impediments of their Pay-TV deals with HBO, Starz and Showtime. But not one had been willing to walk away from millions of dollars.

Now Viacom chief Sumner Redstone has done it--but at the expense of one of his own units, CBS, which owns Showtime. When Paramount and partners MGM and Lionsgate all withdraw from Showtime, it leaves open the question of what movies the channel will show. Variety's Dade Hayes explains. Here's Reuters. And the NYT. And PaidContent. And the LAT.

Apparently Redstone and Viacom prexy and CEO Philippe Dauman realized they had an opportunity, because Paramount and Paramount Vantage's Showtime deal ended at the end of 2007, and Lionsgate and MGM's were up at the end of 2008. In effect they had a chance to get a jump on the other studios which are tied up in other deals for years to come (including Paramount sibling DreamWorks, which has a separate deal with HBO).

UPDATE: Many questions remain about how long it will take--this thing won't launch until January 2009, apparently--to set up distrib agreements with major carriers and infrastructure.