Spice Hot To Be Sold To Vivid

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In the first real fallout from the Spice Entertainment
Cos./Playboy Entertainment Group Inc. deal, Spice is selling its explicit Spice Hot
service to adult-movie producer Vivid Video, sources close to the deal said.

While the terms of the deal are unclear, sources close to
the situation said the agreement will create a third adult-PPV distributor competing for a
piece of the burgeoning adult-PPV pie. The deal, however, would also relieve conservative
Playboy of having to market the more explicit service.

Representatives from Spice and Playboy would not comment on
the matter, and officials from Vivid, which licenses movies to Playboy's AdulTVision
service, could not be reached for comment at press time.

The deal represents another chapter in the short life of
the controversial network, which launched last year with a lot of fanfare, but few
subscribers. Many operators argued that Spice Hot -- which is more explicit than Spice,
Adam & Eve, AdulTVision and The Playboy Channel -- was too adult-oriented for most
communities.

But those systems that did carry the service saw its huge
revenue potential: Spice Hot often doubles and even triples buy-rates of traditional PPV
services. The service is currently in front of more than 6 million subscribers -- a little
over 3 million each for direct-broadcast satellite services and cable operators.

The news will provide some relief to operators that were
worried that Playboy, which initially opposed the launch of Spice Hot, would discontinue
the service altogether. Playboy this past February purchased rival Spice Entertainment --
which includes Spice, Spice Hot and Adam & Eve -- for about $95 million. Most industry
observers felt that the deal would give Playboy all but exclusive reign over the adult-PPV
business.

Now, Playboy will not only face competition from Spice Hot,
but it will also have to deal with upstart The Erotic Network, which offers very explicit
adult product, as well. TEN is distributed in a handful of systems and via EchoStar
Communications Corp.'s Dish Network DBS service.

The three companies will vie for an constantly expanding
adult-PPV revenue base: Adult services generated about $253 million last year, up from
$212 million in 1996, despite most operators cutting adult-network hours because of legal
scrambling issues, according to Showtime Event Television figures.

Adult films still represent 30 percent to 50 percent of
many operators' overall monthly PPV-revenue take.

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