Viacom (VIA) Movie Deal Wrecks CBS (CBS) Prospects

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The torpedoes from Viacom (VIA) ran true and have hit CBS (CBS) right in the boiler room. One of Sumner Redstone’s companies is out to get the other. Fratricide at its finest.

Viacom’s Paramount units says it will end its deal with CBS’s Showtime. Lionsgate and MGM will do the same. These three will start their own pay TV network which will also compete with Time Warner’s (TWX) HBO.

It is hard to imagine why this is a good idea, but the video content people are desperate and their minds are clouded by a need to fix their problems quickly. Premium content is moving to the internet and much of its is pirated. Studios now often spend well over $100 million to make a single film.

But, how will the new channel, owned by the three studios get carriage on cable TV channels? That may not be easy. Cable operators hold the key to getting subscription-based content to their customers. They may well want a toll to help the new enterprise.

CBS may be hurt badly by the crippling of Showtime, but there is no guarantee that the new network can even get to most of its intended audience.

Douglas A. McIntyre