Signaling what could be a resurgence of the Hollywood-pay television war of the early 1980s, Home Box Office and the Warner Bros. film studio appeared close Monday to signing a multimillion-dollar deal granting the pay-TV firm exclusive rights to Warner movies for the next five years.
Officials close to the talks said the controversial exclusivity issue has yet to be resolved, but parties in the talks acknowledged that competitive pressures on pay-TV industry leader HBO may be forcing it to abandon its two-year ban on costly exclusive contracts with motion picture production companies.
"We hope to make an announcement late in the week," an HBO spokesman said Monday about the negotiations with Warner Bros. "Anything else would be premature."
Warner Bros. officials refused to comment on rumors of an impending pact with HBO. One executive said he had been "embargoed for a couple of days."
According to the Wall Street Journal, an exclusive deal between HBO and Warner Bros. could mean as much as $125 million a year to the studio, which has been leading the motion picture industry with such blockbuster movies as "The Color Purple" and Sylvester Stallone's new "Cobra."
As of Jan. 1, Time Inc.'s HBO had 18.3 million subscribers for its two national program services, HBO and Cinemax. Showtime/The Movie Channel, owned by Viacom International Inc., had 8.6 million subscribers. There are indications that both companies have lost subscribers since those figures were released.
HBO has existing exclusive arrangements with Columbia Pictures, Tri-Star Pictures and Orion Pictures, but it has made no other such deals since 1984.
Three Deals Signed
Showtime/The Movie Channel, on the other hand, has been pursuing exclusive movie contracts aggressively in recent months, signing with three production companies since early April.
Peter Chernin, Showtime/The Movie Channel executive vice president, said the company considered "it of vital necessity to do everything in our power to make our services the most marketable and exciting in the industry."
Exclusive movie deals, he said, are a "critically important way to differentiate ourselves from our competitors."
In addition to heating up the contest between HBO and Showtime/The Movie Channel, a new round of exclusive contracts between pay-TV firms and studios could mean that viewers would be forced to subscribe to more than one pay-TV service if they wish to see a full catalogue of recent movies.
Subscribers to smaller, independently owned pay-TV services would be especially hard hit by new exclusive contracts between the leading pay-TV networks and studios, said Jerry Harvey, director of programming at the popular Z Channel pay-TV service in Los Angeles.
The exclusivity issue arose again in April when Showtime/The Movie Channel signed a three-year exclusive agreement with Cannon Group, a fast-rising independent film company with such movies as "Runaway Train" and the not-yet-released "Superman IV."
The value of the Showtime-Cannon deal, which also includes commercial-TV rights to Cannon's films, was reported to be in excess of $100 million.
In addition, Showtime signed similar exclusive deals with the Touchstone Films division of Walt Disney Co. and with Atlantic Releasing Co. And, sources said, it has been in negotiations on an agreement with New World Pictures Inc.
Competition for market share among the pay-TV networks grew heated, however, as the industry experienced a prolonged slowdown in growth rates.