The movie and television industries have greeted the arrival of Epix with mixed emotions. On the one hand, the loss of Paramount, Lionsgate, and MGM titles from Showtime has opened up a small window of opportunity for the first premium movie network launch since Starz rolled out in 1994. On the other hand, many argue that the demand for another linear premium movie network isn't strong enough to justify Epix's launch, given the profusion of multiplex premium channels already carried by pay TV operators.

In the past ten years, pay-TV operators have launched six HBO multiplex channels in addition to the flagship HBO, seven additional Cinemax multiplex channels, four additional Showtime multiplex channels, eight additional Starz multiplex channels and six additional Encore multiplex channels. Pay TV operators are loath to add another multiplex group to an already cluttered premium movie channel lineup. That is why Epix is avoiding the multiplex suite of channels, opting instead for strong on-demand components, both in the pay TV operator's walled-garden and via the Epix website (after authentication).

Overall, the Epix multiplatform business model shows promise, given the cable industry's transition as a whole to what has been dubbed the 'TV Everywhere' paradigm. However, in order for this pioneering network to compete with established premium TV nets such as HBO and Showtime, it needs to secure linear carriage with industry leaders Comcast and DirecTV. The failure of many recent launches, such as Shalom TV and The Anime Network, to get linear carriage has resulted in their relegation to the VoD-only ghetto by pay TV operators. Screen Digest believes that, fortunately for Epix, linear carriage deals with Comcast and DirecTV are possible, especially after the agreement with Dish Network

Regardless of the negative press, the channel has been gaining traction. Reports have surfaced that the service attracted 1,000 subscribers per day with FiOS during its first 30 days. When applied to the deals in place, and assuming a decline in additional subscribers in subsequent months, Screen Digest estimates that Epix currently has nearly 650,000 subscribers paying $9.99 per month and could end up with slightly more than 1.5 million subscribers by year-end.

In Viacom's year-end 2009 conference call CEO Philippe Dauman made the bold statement that the channel would be cash-flow positive by year two. He stated that Viacom had spent $82m to date on the fledgling network and received $110m in license fees for Paramount titles. In suggesting that the company could be cash flow positive in the second year, we can only assume that the new network has secured lower programming rates than old-era licensing deals would have called for, thanks in part to the collapse of the Showtime deal which has confirmed the declining value of premium network film content rights to the studios and their profit participants.

Given the changing realities of the premium movie marketplace, Screen Digest believes that Epix is in a rare position to break the mold as a new premium cable network. If the channel can become cash flow positive in the first two years, it will represent one of the greatest achievements in cable network history, especially given the likelihood that the channel will not likely have broken the 5m subscriber mark by that time.