Blockbuster in talks for Viacom-led channel stake

PHILADELPHIA (Reuters) - Blockbuster Inc (BBI.N: Quote, Profile, Research) is in talks to buy a stake in a new premium cable TV channel to be launched by Viacom Inc (VIAb.N: Quote, Profile, Research) with Lions Gate Entertainment Corp (LGF.N: Quote, Profile, Research) and Metro-Goldwyn-Mayer, sources familiar with the situation said on Tuesday.

Blockbuster is exploring getting digital rights to the channel's programming in exchange for an investment in the partnership, the sources said. The video rental company has been holding talks for several weeks, one source said.

The deal has not been finalized and could yet fall apart. Another source familiar with the matter said the joint venture is also in discussions with other parties over a fourth partner, but declined to say more.

Viacom, MGM and Blockbuster could not be immediately reached for comment on the talks. A Lions Gate spokesman declined to comment.

Viacom and its two current partners announced plans on April 20 to launch a new premium television channel in autumn 2009 after talks with CBS Corp's (CBS.N: Quote, Profile, Research) Showtime to renew movie licensing deals fell apart over pricing.

Combined, the three companies had received about $300 million to $350 million annually from Showtime, according to one source, which a fourth partner in the joint venture is expected to offset.

Otherwise, cable operators and satellite television service providers would have to risk charging as much as $5 per subscriber per month to make a profit off the channel, according to Pali Research analyst Richard Greenfield in a research report published on Monday.

Blockbuster's discussions for the pact are separate and unrelated to its $1.3 billion unsolicited bid to buy electronics retailer Circuit City Stores Inc (CC.N: Quote, Profile, Research), the source said.

In addition to pursuing Circuit City, Blockbuster continues to explore options such as joint ventures and marketing pacts with other companies, sources previously told Reuters.