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When the deal was completed on September 6, 1983, the operations of The Movie Channel and Showtime were folded into a new holding company, Showtime/The Movie Channel, Inc., which was majority owned by Viacom (controlling 50% of the venture's common stock as well as investing million in cash), with Warner Communications (which owned 31%) and Warner-Amex (which owned the remaining 19% interest) as minority partners.
As the consolidation of its operations with The Movie Channel was ongoing, in 1983, Showtime increased its national distribution on cable providers when competing premium service Spotlight ceased operations, effectively absorbing that channel's subscriber base.
After the revised proposal was rejected on July 28, Warner Communications and American Express restructured the purchase to include only Viacom as a partner, bowing Gulf Western and MCA out from the partnership.
The changes – which Justice Department officials acknowledged would "prevent any anti-competitive effect from arising" following the merger, by allowing other premium services to enter the market should the venture significantly raise licensing fee prices for films – led the Justice Department to drop its challenge to the merger agreement on August 12; the Department formally approved the deal the following day on August 13.
Under the revised proposal, the four studios would each own a 22.58% stake in the two networks, with American Express owning a 9.68% minority interest.
The respective coastal feeds of each channel are usually packaged together (though most cable providers only offer the east and west coast feeds of the main Showtime channel), resulting in the difference in local airtimes for a particular movie or program between two geographic locations being three hours at most.
However, the deal ran into regulatory hurdles since Warner, Universal and Paramount received 50% of their respective total revenue from film releases and licensing fees from premium services; furthermore, Showtime and TMC combined would control about 30% of the pay cable marketplace, creating an oligopoly with HBO (which, in conjunction with Cinemax, controlled 60% of the market).
After a four-month investigation resulted in the Department of Justice filing a civil antitrust lawsuit against the five parties to block the Showtime-TMC merger on June 10, 1983, the Department asked Warner and American Express to restructure the deal during hearings for the case.
The proposal was motivated by the studios wanting to increase their share of revenue for licensing rights to their films to premium television services, as well as concerns that HBO's dominance of that market and its pre-buying of pay cable rights to films prior to their theatrical release would result in that service holding undue negotiating power for the television rights, resulting in a lower than suitable licensing fee rate the studios would be paid for individual films.
The three companies officially announced their agreement in principle to acquire interests in TMC on November 11, 1982.