Cable Operators

Not Ready For HD Close-Up

8/03/2007 8:00 PM Eastern

While it’s no secret that a rising number of U.S. consumers continue to purchase televisions capable of broadcasting in high definition, only about 44% of HDTV homes actually receive high-definition channels. That’s one reason adult entertainment networks are taking a “wait-and-see” approach when it comes to making their content available in HD, according to Michael Paxton, a principal analyst with In-Stat, a sister company to Multichannel News.

“Adult channels aren’t missing out on a great revenue opportunity yet,” said Paxton. “They are waiting until the market matures and the distribution is more widespread.”

Adult channels and content providers are also accustomed to producing content on lower budgets, according to Paxton. “Filming in high-def has the potential to double production costs. Producers aren’t completely sold on the ROI.”

According to Comcast spokesperson Jenni Moyer, her company has no immediate plans to offer HD adult channels for its customers simply because the demand is not there. “Our customers have told us they want more mainstream movies, primetime shows and sports broadcast in HD,” she said.

And then there is the question: Is an HD picture that reveals blemishes and imperfections that would not be apparent in a standard-definition picture necessarily a good thing for the genre?

“The HD format sometimes provides too much detail,” Paxton said. “Less is better in some instances.”

Finally, there is the issue of bandwidth.

“For cable operators the real challenge is the balance of bandwidth allocation and where they are going to derive more revenue per bit,” said Ken Boenish, president of The Erotic Networks. “Operators can promote Hollywood blockbusters in HD and attract a lot of viewers. It might be a more meaningful use of bandwidth than doing the same for adult titles at this point.”

THE HD REALITY

Gary Rosenson, Playboy TV senior vice president of affiliate sales and marketing, said cable operators are currently in the beginning stages of increasing bandwidth to consider Playboy HD.

“Our primary focus has been offering Playboy HD titles via the SVOD platform. We’re also re-evaluating the Playboy HD linear channel strategy given the recent surge in demand for it,” Rosenson said.

Playboy HD could be offered as an “opt-in” to a high-definition tier, much as Playboy TV en Espanol helped to drive the Hispanic tier for many operators, said Rosenson.

“This would be an incremental revenue stream. If offered with Playboy TV’s existing standard-def channel, it would likely be a penetration driver,” Rosenson said.

Hustler TV president Michael Klein is dealing with similar HD issues.

“On VOD, there will eventually be a platform for [adult content], but server space is obviously a precious commodity for operators right now,” he said. “But as they grow and server capacity increases, they will definitely take a closer look at it.”

Currently, the bandwidth of six pay-per-view channels is needed for one high-definition adult movie, according to Klein.

“So one adult movie has to produce revenue to the equivalent of six PPV channels, which is very hard to do,” Klein said. “Operators are already making a lot of money from adult content now, so it’s hard for them to justify why they need to migrate to HD.”

MORE HD OFFERINGS

Still, as HD becomes more acceptable and operators try to squeeze more HD offerings onto VOD, they will look for ways to boost server capacity to include more HD adult content, according to Klein, who is also taking preliminary steps into the Blu-Ray DVD market.

This year, Hustler partnered with CD Girls to release the first adult Blu-Ray title, Jenna Hayes Oil Orgy. Other Blu-Ray titles are in the works, according to Klein, who cautioned that Blu-Ray manufacturers are also in a quandary as they don’t want to be perceived as supporting the adult entertainment market.

“I suppose if they want to wind up being the next Betamax, they can avoid the adult marketplace, said Klein. “Kids have to go to a store to purchase adult DVDs. If kids are watching adult Blu-Ray DVDs, chances are a parent or other adult purchased it for them.”

TEN’s Boenish believes the migration from standard definition to high definition is ultimately akin to the transition from black and white to color.

“Today, you expect things to be in color because that’s the way it is. We expect that there will come a time when HD is the new standard definition. HD clearly is a better technology,” he said.

Boenish isn’t too concerned about available bandwidth preventing adult content from becoming more mainstream in the HD arena.

FREEING BANDWIDTH

The transition from analog to digital, as well as new technology such as switched digital video, will allow cable operators to free up the bandwidth to support HD.

“Over time, people will expect programs to be in HD and it won’t be such a novelty. But I don’t think cable and satellite operators are going to use adult entertainment to pave the way for HD because adult entertainment today is still looked upon as a niche market,” Boenish said. Chances are we won’t be seeing any billboards and cross-channel spots any time soon saying, 'Hey, we now have HD adult.’ Animal Planet, movie services, CSI — those are the types of programs where they’ll be screaming from the rooftops that they’ve got this stuff in HD and that’s why you need to get your service from us. Adult entertainment will follow in the wake.”

HEAVY EXPERIMENTING

Boenish expects TEN to experiment more heavily with HD content next year, by serving it up on select test sites. In turn, TEN will leverage this data to determine whether it makes good business sense to make further investments.

“We’re a company that does a lot of consumer research and we’ll be talking to a lot of consumers to find out what value HD plays on HD content — if they’ll pay a premium, and if it’s available would they buy more,” said Boenish. “All of that advance research and testing needs to be done before we start waving the HD flag for adult content.”

March