Some of the country's smallest cable operators will have to decide whether to offer fewer pay-per-view channels to consumers or to fund a technology upgrade because programming provider TVN Entertainment Corp. is converting a portion of its channels for video-on-demand use.
E-mail messages were sent to systems starting in January to notify users that 10 of 20 channels will be converted to VOD use at the end of March, TVN confirmed.
"This is part of a broader industry trend: the migration away from pay-per-view to VOD," TVN chief operating officer Doug Sylvester said.
TVN will continue to support pay-per-view with solid programming offerings, he said. The decision does not effect niche channels or special-event programming, he added.
For many small systems, converting channels to VOD isn't a viable option.
As it is, PPV is a retention tool and not a moneymaker, said Haefele TV Inc. chief engineer Mike McNamara. His system is located near Ithaca, N.Y., and has a base of 5,000 subscribers, only 365 of whom take digital service. He said 60% of the operator's PPV revenue goes to TVN, with a large chunk of the remainder going to billing provider Great Lakes Data Systems.
Were Haefele to follow TVN into the VOD business, McNamara estimated it would cost at least $150,000 for headend improvements, plus thousands more for billing conversions.
"For our system, that's hard to pay back," he said.
In the past year, PPV has been tough on the smallest operators. Last February, as many as 250 systems complained they would have to get out of the business altogether when In Demand imposed a $500 monthly flat fee rather than a per-use license fee.
It was cost prohibitive to track all the PPV activities of the small systems, In Demand explained.
The small operators' trade group, the American Cable Association, lobbied for relief and In Demand compromised, offering small operators a $250 monthly rate if they filed activity reports electronically with a proprietary spreadsheet and paid the fee in a timely manner.
Some small operators indicated last week that they would attempt to secure another 10 channels from In Demand.