CBS Corporation

Showtime announced today that it has cut a new output deal with Disney  that will give Showtime the rights to DreamWorks movies released from 2010 - 2015 (up to 35 films, or about 5-6 films per year). This helps fill the hole in Showtime's movie schedule, adding to the previously thin line-up of films from Summit and Weinstein.

Terms were not announced, but assuming an output license fee at a typical 11% or so of U.S. box office receipts and using the average $267m in annual box office that DreamWorks films earned from 2006 through 2009, excluding Transformers, would yield an estimated annual increase in programming costs for Showtime of $30m/yr (vs. '10E EBITDA $575m). Given Starz did not want the movies, there was likely no other bidder for the rights and CBS should have garnered a more attractive rate. DreamWorks films did $185m of domestic box in 2006, $707m in 2007 ($388m ex-Transformers), $243m in 2008 and $651m in 2009 ($248m ex-Transformers 2). DreamWorks is still ramping up (studio relaunched with financing from Reliance) and so costs will not start up for Showtime for some time.

Key, of course, will be the level of commercial success of the DreamWorks films and whether Showtime's film line-up will be sufficient relative to its prior output deals with Paramount, Lion's Gate and MGM. CBS mgmt has been consistent in their view that TV success and the limited Showtime film line-up will be sufficient to maintain and grow Showtime's subscriber base.

At the same time Showtime had been spending $300m/yr for new film content and is now headed towards spending only $50m to $75m annually.