Word that Showtime Event Television's July 14 niche pay-per-view event featuring psychic Sylvia Browne conjured a respectable 25,000 buys would normally be considered a positive development for the struggling industry.
The problem for SET and cable operators is that an online opportunity for viewers to send write-in questions to Browne — promoted only on the PPV telecast — generated 29,000 posts, which means a significant number of households had gained illegal access to the show.
That example of PPV piracy is one of many that SET said has hampered the development of mid-sized and small events.
SET officials, though stunned at the findings from the Browne program, believe piracy is even more rampant than even that incident illustrates.
"When you factor in that only half of the homes in the country have computers — and not all of those have Internet hookups — there is no way you can have more Internet questions than actual buys," said SET senior vice president of sales and affiliate marketing Donovan Gordon.
Gordon said SET continues to evaluate its commitment to smaller niche events, due to the high incidence of signal theft. Indeed, SET maintains that there's one illegal PPV home for each legitimate buy.
The National Cable & Telecommunications Association estimates that overall cable theft costs upwards of $5 billion each year.
"In order for PPV to be a viable business going forward, we have to address the theft problem," Gordon said. "Distributors have to weigh whether to take revenue risks, knowing that there's significant theft within the industry."
Though digital cable has tempered the rampant spread of signal larceny, Gordon pointed to recent reports that 10 percent of direct-broadcast satellite users are stealing signals. "Digital-cable takes care of [theft] in the short run, but it's just a matter of time before the illegal boxes hit the street," he said.
Gordon, who is also president of the Broadband & Internet Security Task Force, said some operators are beginning to address the issue, but too many remain in denial about the problem.
"A significant number of new basic connects for MSOs are coming from the conversion of illegal users to paying customers," Donovan said. "But we all know this is a problem, and we have to continue to beat the branches on this issue."
Overall, PPV events generated $126.7 million in revenue during second-quarter 2001, 4 percent below the $131.6 million generated in the same period last year, according to an SET summary.
Wrestling and boxing events accounted for the lion's share of events during the quarter, combining on 11 of the 23 shows in the quarter. World Wrestling Federation Entertainment Inc. events pinned the top four revenue spots, according to SET.