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Another View: Will 98 Finally Be THE Year for PPV?

1/04/1998 7:00 PM Eastern

Given some of the positive developments that took place in1997, pay-per-view executives should have been first in line to welcome 1998 as one of themost anticipated years in the industry's checkered history. Instead, executives aremore reserved, waiting for several clouds to pass over the snakebit industry beforeexhaling an enthusiastic, 'Happy New Year!'

Much like past years, the light seems to be at the end ofthe tunnel for PPV, but that generally has proved to be an illusion. In 1997, operators --with the help of several strong movie titles, an increase in addressable homes and aheavyweight rematch fight -- smashed movie and event revenue records left and right. Butwith every step forward that the industry took in 1997, it seemed to take two steps back,leaving it once again to chant in 1998 its familiar and unfulfilled chorus of: 'Thisyear is finally the year.'

On the surface, prospects for the new year look bright. In1997, revenue rose 32 percent, finally breaking the $1 billion barrier, and it should jumpby another 34 percent in 1998, according to Showtime Event Television.

Cable operators are finally rolling out digitalcompression, and the promise of near-video-on-demand and more PPV choices for consumers isnear. Tele-Communications Inc.'s Headend in the Sky platform and TVN EntertainmentCorp.'s 32-channel PPV-movie service seem to have operators excited about theprospect of finally challenging DirecTv and its triple-digit monthly buy-rates for PPVmovie supremacy.

But just as PPV begins to pick up steam, a number of monkeywrenches from both inside and outside of the industry could upset that progress.

The first could come from Hollywood. Warner Bros. is thefirst studio to withhold its popular movie product from a 'middleman'distributor -- Viewer's Choice -- in an effort to renegotiate a better split formultichannel distribution. If Warner is successful -- and many of the studios hope that itis -- operators could see revenue per movie drop by 5 percent to 10 percent, which couldcripple any projected revenue increases that will come from a 20- to 30-channel NVODoperation.

Another revenue concern is the volatile boxing category.PPV executives rode the wave created by the November 1996 Mike Tyson-Evander Holyfieldbout to generate a record $100 million in PPV revenues for the 1997 rematch. But beforethe industry could begin counting the money, 1998's potentially rosy outlook wiltedwith a piece of Holyfield's ear, courtesy of Tyson's choppers. Tyson was bannedfrom boxing for life, and the industry is now left without a major heavyweight paydayuntil he returns, albeit possibly this year.

Even the anemic concert industry was in line to receive aboost with the surprise booking of the PPV-tested Rolling Stones last month. But whatshould have been a decent event to finish out the year was compromised by DirecTv'sgiveaway. Viewer's Choice, which split the concert's $3 million upfront costwith DirecTv, ended up with a disappointing performance, while subsidizing DirecTv'slosses, angering many industry executives in the process.

Nevertheless, there were some truly positive occurrences in1997 that the industry hopes to build on in 1998. The adult category seems to haverecovered nicely from the debilitating hit that it took from the audio-scrambling issue.While the Telecommunications Act of 1996 forced many operators to offer adult networksduring late-night, 'safe-harbor' hours, it didn't significantly curtail PPVadult revenues. And with Spice Entertainment Cos.' new, ultra-risqué Spice Hotservice drawing double the buy-rates of Spice, operators will still be able to count onstrong adult numbers in the upcoming year.

Wrestling, led by the remarkable growth of TurnerBroadcasting System Inc.'s World Championship Wrestling, provided a welcome boost tothe slumbering genre and turned an already-steady revenue stream into a force that couldrival boxing in 1998.

In another victory, PPV was able to defeat the VideoSoftware Dealers Association's latest bid to extend PPV windows. The industrycontinues to enjoy 30- to 50-day windows on most titles, but it will have to continuefighting mounting pressure from the stagnant home-video industry, which is pushing for60-day-plus windows.

Overall, industry executives described the outlook for theindustry as more overcast than stormy. But, as veteran PPV executives know all too well,it only takes an unscrambled adult feed or an bite inside the ring to spark a monsoon.

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