Hollywood studios snub Murdoch

Warner Brothers, Hollywood's largest studio, is planning to pull all its top first-run films from BSkyB's premium movie channel - because not enough viewers watch it.

Warner Brothers, Hollywood's largest studio, is planning to pull all its top first-run films from BSkyB's premium movie channel - because not enough viewers watch it.

In a further blow to Rupert Murdoch, who owns 40 per cent of BSkyB, the studio is planning its own premium channel, beamed to British homes, and it has invited other major film-makers to join it.

Universal, which is in the throes of being taken over by Mr Murdoch's arch rival, Jean-Marie Messier of Vivendi, is understood to be keen to join in. Fox, which is owned by Mr Murdoch's News Corporation, is almost certain to stick with BSkyB. However, it is only one of five Hollywood majors which provide the majority of films shown on the Sky film channels.

According to industry magazine New Media Markets, the Hollywood studios are worried about the falling number of subscribers for BSkyB's three film channels, which lost an average 6 per cent of their cable subscribers in the second quarter of the year, according to the latest figures from the Independent Television Commission. Even though the number of cable homes is increasing, the BSkyB film channels have been in decline since the beginning of this year.

Sky Premier's cable subscriptions dropped from 909,843 at the beginning of 2000 to 792,507 on 1 July. Sky Moviemax dropped from 889,366 to 758,292 over the same six-month period. And Sky Cinema went from 893,650 to 744,233.

BSkyB is also facing competition from new entrants such as FilmFour and the cable TV-backed Front Row, as well as video-on-demand services such as Homechoice and Yes.

The Hollywood studios give BSkyB exclusive rights to show the first run of their films on TV. The fee depends on the number of subscribers and the film's popularity, but can be as much as £2.5m for a box-office hit.

BSkyB is understood to take in more in subscriptions every year than the entire box-office income of British cinemas.

"Hollywood has continuing disquiet about the performance of Sky's movie channels," said Andy Birchall of rival movie service Front Row. "In the back of Warner Bros' mind during negotiations will be the declining performance of the three movie channels."

A senior Warner executive indicated that a stand-alone Hollywood channel was a distinct possibility. "The studios have been looking at how to expand their UK pay-television business in the future because of the proliferation of pay-TV platforms," he said.

A BSkyB spokesman dismissed the Warner move as a negotiating tactic to try to persuade BSkyB to pay more for its moves. "Movie fans want to watch the biggest stars, the biggest pictures and the best directors, irrespective of the studio that made them," he said.

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