NTL and Telewest in talks on pay-per-view film deal

Merger talks between NTL, the US cable company and Telewest Communications were given a boost yesterday, after it emerged that NTL had given its backing to a Telewest-led consortium bidding for pay-per-view movie rights, writes Cathy Newman.

NTL has lent its support to On Demand Management, a group led by Telewest Communications, the second largest UK cable company, according to industry sources.

The move significantly strengthens the cable industry's competitive advantage against BSkyB, which is also talking with Hollywood studios about pay-per-view television rights.

NTL initiated merger talks with Telewest at the beginning of last month in an attempt to kick-start further consolidation in the flagging UK cable industry. NTL hopes to create a rival to the biggest cable company, Cable & Wireless Communications (CWC), which was formed via a pounds 4.5bn merger of four cable companies in April.

Rivals have accused CWC of undermining the cable companies' attempts to tie up programming deals that would loosen BSkyB's monopoly on film rights. CWC is considering using BSkyB as its exclusive pay-per-view supplier, although no deal has yet been signed.

Cable industry executives are hoping that NTL's involvement in On Demand may persuade CWC to join its fellow operators in competition with BSkyB.

CWC had originally been part of On Demand, which is also thought to include General Cable, Diamond Cable Communications and Comcast Cable. Both cable and satellite broadcasters have been talking to Hollywood studios such as Disney, Universal, MGM and Warner for many months about exclusive pay- per-view deals.

So far, pay-per-view events - where consumers pay to view a specific film or sporting fixture - have all been negotiated by BSkyB and have mainly been limited to boxing events.

But digital television, which launches next Spring, will open the way for a range of pay-per-view opportunities, especially in the film industry.

The proliferation of channels promised by the switch from analogue to digital will enable individual movies to be shown at roughly fifteen minute intervals on different channels, a facility known as near-video-on-demand.

According to some City analysts, pay-per-view movie services are a big opportunity for the cable companies. Although digital technology will allow BSkyB to provide many more channels than it does at the moment, transmitting by satellite still limits the number.

Cable, by contrast, has virtually limitless capacity, and could, according to one cable operator, "do 500 different channels in 500 different areas" if it chose to.

BSkyB sees pay-per-view as a big threat to its near monopoly of subscription television and is keen to nip any competitive challenge to its position in the bud. On Demand Management is the most credible attempt to challenge yet and BSkyB will be doing its utmost to prevent CWC following NTL into the venture.

No one at NTL was available for comment.

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