Behind Carolco-TCI deal
Carolco director and financial adviser Michael Garstin and TCI chief operating officer Brendan Clouston insist the deal won't take effect until everyone -- from theater owners to talent agents -- is aboard.
After two weeks of mixed reaction since Daily Variety revealed details of the plan, the pair now make clear the novel pay-per-view arrangement could create new opportunities for the studios, from breaking out of the Christmas and summer release windows to simply wooing TV viewers who never watch films to give it a try.
If the Carolco PPV window can generate the millions that are projected, it may be as big a change to the entertainment industry as when the first VCR flashed 12:00 in 1975.
This unprecedented arrangement conjoins two very different cultures: The technology-driven cable operator and the flashy Hollywood indie. The two came together last fall, when Garstin approached Clouston with the idea that TCI should look at the movie business.
Carolco's financial overhaul is expected to be sewn up by the end of June. After reviewing Garstin's restructuring and goals, the cable exec came back with the PPV proposal.
"Carolco has done a good job of financial engineering," said Clouston, TCI president John Malone's key deal-maker. "It comes out of the restructuring with $ 100 million in cash and $ 200 million in bank loans. From our point of view, we're interested in this promotional event and it also made sense to make the investment."
For his part, Garstin said, Carolco chairman Mario Kassar must convince the talent that the deal makes sense. "If one of the major players thought this was going to harm their career or subsequent release," Garstin noted, "they wouldn't do it."
To ensure talent participation, the deal provides quite a carrot. The two companies expect a buy rate between $ 50 million and $ 100 million for a single picture shown three times. That is based on signing up a good chunk of the estimated 20 million homes -- a third of cable households -- equipped with addressable set-top boxes.
TCI plans to recruit all the MSOs to participate, including ones it doesn't own, just as it would for a major championship boxing match.
But both exex concede that there's plenty of work needed to mend relationships with exhibitors. The companies were caught short when the story broke on April 21 and hadn't even made overtures to theater owners yet.
"We didn't anticipate the severity of the leak," Clouston said. "We clearly couldn't discuss certain things until we'd talked with the agencies, and then we'd go to the theaters."
Rather than mellowing, reaction to the announcement has only solidified in opposition to the deal. Clouston has yet to talk to the head of the nation's biggest theater chain, United Artists' Stewart Blair, though TCI is a major UA shareholder.
As a possible appeasement, Garstin said, the partners are considering ideas such as tying in ticket sales to PPV subscribers or selecting a handful of viewers to attend the premiere screening.
Exhibs may be lulled by the argument that a major PPV film could open up a new theatrical release window. As it is, the Christmas and summer months are booked up with star-heavy vehicles.
"There are periods in the exhibition windows when you wouldn't see a major picture released," Clouston said. "There may be a way to work together to shift those windows."
Both Garstin and Clouston also see this experiment as a major push to establish PPV.
Rather than cannibalize B.O. numbers, they argue, the target is those people who don't pay to see a movie in a theater or on cable.
"We think it'll help the cable industry by driving this new technology. We've been talking about putting a foundation under the PPV window," said Clouston.
"We're doing some experiments in Denver in PPV and we're seeing 30% of people who weren't cable subscribers and define themselves as not renting videos or as theater-goers. They're now using PPV. No one window destroys other windows," he said.
If the deal is a success, both exex acknowledge that the number of films could be increased. But Garstin cautions that the idea is to keep the number of films limited so the impact isn't diluted.
Whatever the outcome, the TCI and Carolco exex are aware that the whole PPV movement is a threat to the status quo.
Clouston was ready with a quip to lend perspective to TCI's Hollywood foray. He figures it will be five years or more before viewers will be able to search a library of films and select one from home. "It took a meteor to wipe out the dinosaurs," he laughed. "We're not talking a meteor here."
