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What Ops Won’t Say About Adult PPV

6/13/2004 8:00 PM Eastern

Without adult programming, it is possible there would not be a pay-per-view or video-on-demand business in the cable industry today.

The movie studios have been increasing their splits for recent theatrical releases to the point where a cable operator, after paying a middleman such as In Demand LLC, might only keep 35%-40% of the retail sale — and that’s before covering any operational and transaction expenses. On the other hand, the splits offered by the various adult programmers are far more generous, ranging from 80% to as high as 95% (if the system takes multiple channels) to the operator.

This means that in many systems, more than 50% of the gross profit from PPV or VOD is being generated by adult programming. There’s a good reason for this. Unlike Hollywood theatricals, which often have production and marketing budgets that top $80 million to $150 million or even more, adult films are often shot on budgets ranging from $15,000 to $50,000.

The films shown on cable and satellite “adult” channels are not the same versions as the “hard core” XXX fare that can be found at the local video store or on Web sites.

In some instances, films shown on multichannel platforms have either had scenes or certain close-ups edited out. Sometimes, a “cable” version of the sex scene is shot at the same time the hard-core version is filmed and then edited in. Some adult services offer as many as eight different feeds, from less-edited to more-edited.

The least-edited feeds are, however, much more explicit than what was available before 1998, when cable editing standards loosened up as a result of the introduction of digital converters (which offered better security) and other changes in regulations.

Data on who uses adult programming is very hard to acquire.

There is anecdotal evidence that much of the revenue is being driven by a small percentage of heavy users. In other words, if you like adult programming, you like it a lot.

A recent test of adult programming on VOD did show a curious phenomenon: Many users accessed fare for a few minutes at a time, but did so many times during the day. There is some evidence to suggest that the users are often upscale demographically. This is confirmed, in part, by the fact that adult fare often carries a substantial price premium when compared to Hollywood theatrical releases.

The religious opposition to adult programming on systems has abated.

There was a time when local religious organizations would threaten to have their members boycott cable if adult programming was added to the system, and well-known brand names such as Playboy were a lightning rod. This opposition is rarely encountered any more, and cable operators manage the public-relations issue by rarely, if ever, promoting the availability of adult offerings.

When opposition is voiced, a good counter is that more explicit fare is often available at the local video store and available 24/7 to anyone with an Internet connection.

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