WHAT WILL YOUR ENTERTAINMENT DOLLAR BUY IN 1997? : Pay-per-View Seen as Next Blockbuster Income Producer for the Film Industry

It is Labor Day weekend, 1997. You have some neighbors coming over for the evening (they left this morning to beat the traffic), the barbecue is stoked for an early fish fry (red meat was outlawed two years ago) and your new 80-square-foot Sony high-definition television screen is putting out a picture so sharp your kid just broke his arm trying to hug a Smurf.

You know you’re going to end up watching TV. The question is, what are you going to watch?

You have many choices. “Wheel of Fortune,” starring Vanna White-Sajak, is now broadcasting in 3-D, better to follow her vowels with. Your video store just delivered your colorized copy of “Mondo Cane.” And, as one of the 40 million families with addressable cable systems, you can tap in to the world premieres of such long-awaited summer movies as “Jaws 9,” “Rocky 10 Through 12,” “E.T. 6” and “The Fernando Valenzuela Story.”

It is ironic, back here in 1987, to hear that negotiations between the people who direct films and the people who finance them hang on formulae for dispersing the spoils as far off as the mid-1990s. After all, the contract being negotiated will expire in 1990.

Progress is measured in different ways in Hollywood. For more than half a century, movies changed while the technology for making and showing them remained essentially the same. Now that technology is raging forward, the movies are all about the same.

The technology, or at least its potential, has seriously raised the stakes in labor negotiations in Hollywood. Ten years ago, no one could have known that the annual income from videocassette movies would eclipse the receipts from first-run theatrical playoffs by 1987.

But it has done that and more, and now the talent end of the industry--the actors, writers and directors--who negotiated shares of the video business while it was barely a fertilized egg, is trying to hang on to its previously negotiated share of pay-per-view as well.

Pay-per-view is, by most accounts, the next blockbuster income producer for the film industry. Not because people will pay vast amounts to see a movie at home on the same day it opens in theaters. But, say some knowledgeable sources, because the major studios see it as a way to tap the massive audience that has developed for videocassette rentals.

As it is, studios sell most of their cassettes to video retailers for $45 to $50 each, and are then out of the game. No matter how many times the tapes are rented, neither the producers nor any of the other profit participants see any of the money.

With pay-per-view--the ability of people at home to pay a premium to see a specific movie at a set time--the studios could sandwich a first-run home release between the theatrical run and the video release.

As a consumer, you could avoid the frustration of searching for new releases at your local video store by paying a premium and taping it yourself at home.

Right now, pay-per-view is not much of a factor in film marketing. According to Steven Rosenberg, an analyst with Paul Kagan Associates, only about 27% of America’s 40 million cable-connected homes are equipped with addressable converters, electronic boxes that allow subscribers to order a specific program and be charged separately for it.

Movies are offered to these subscribers now by three different companies, at an average cost of about $4.50. But the total grosses for all three companies may total less than $75 million this year, compared to the more than $3.5 billion grosses collected from both theatrical and video releases.

The producers’ cut of the $73 million will be around $20 million, Rosenberg says. The combined share for writers, directors and actors will be around $1 million.

A few attempts to test pay-per-view with first-run movies have not been successful. The filmed adaptation of “The Pirates of Penzance” in 1983 was premiered on advance-ordered subscription TV and it was seen by only a handful of hearty Gilbert and Sullivan fans.

But it was hardly a fair test. No one went to the theaters to see “Pirates,” either.

Few people who figure to benefit from it doubt that pay-per-view will become a major player in the exhibition of motion pictures. It’s only a matter of time.

Brian Walton, executive director of the Writers Guild of America, West, says knowledgeable sources tell him the pay-per-view market will be grossing $2 billion by 1997. At their current rate of 1.2% of producers’ receipts, the writers would receive more than $2 million in pay-per-income that year.

Obviously, the guilds want as big a cut of the pay-per-pie as they can get. If the studios effectively cut into the video-rental business by delivering the films directly into homes, fewer videos might be sold and video residuals for writers, directors and actors would decline.

Management, faced with higher film costs and the escalating costs of marketing movies, want to hang on to as much of the secondary, or alternative, markets as they can.

For us consumers, the issues seem a little distant, and the debate premature. It’s a tug of war being held about a month before the company picnic.

Art Murphy, Daily Variety’s trend watcher, says it is typical of guilds during the current technological shakeout to put an overbite on undeveloped systems.

“Every time there’s a new invention, they think it’s just around the corner,” Murphy says. “If someone read a story about holograms, they would go into the next negotiations saying, ‘We want 40% of that.’ ”

The problem with discussing Hollywood’s labor/management issues in terms of pie charts is that technology does threaten to break through every other day and no one knows for sure what the pattern of movie exhibition will be five or 10 years from now.

Hologram films may not be right around the corner, but there are other formats threatening to revolutionize the way movies are made and seen.

Douglas Trumbull’s Showscan system--the shooting of movies on 70-millimeter film at 60 frames per second--produces high-definition images on a curved screen and could be adapted by both film makers and exhibitors right now.

Several companies are experimenting with features that are shot on high-definition videotape, then transferred to 35- millimeter film. Its proponents say the image is equal in clarity to Showscan and that it reduces film-making costs by as much as 30%. The Italian-made “Julia and Julia,” starring Kathleen Turner, will be the first of the new generation of tape-to-film movies when it is released in the States this fall.

There is also the concept of direct satellite transmission, which would involve a total revamping of theatrical exhibition. Movies would be beamed directly into theaters and relayed to the screen. It would eliminate film altogether, along with the expense of buying and maintaining projection equipment.

Breakthroughs are coming for home viewing, too. High-definition screens, improved sound systems. Pay-per-view itself seems dependent on the industry’s ability to provide inexpensive two-way cable boxes, which would allow consumers to order movies without talking to answering machines at their cable companies.

Now, if they--the studios and the talent--can concentrate on making a few good movies, we’ll all be in business.