Pick-and-Pay Pleasure : Pay-per-view channels, still waiting to become next big time, say the future is . . . well . . . soon

As your eyes survey the menu, a few items grab your attention. The stylish first episode of “Miami Vice” sounds good for starters. You key the correct code into your remote control. Hmmm. How about a movie afterward? You peruse the movie directory and decide on Spike Lee’s latest. And for something light to finish the evening, you punch in the code for live comedy at The Improv. That settled, you lean back for an evening in front of the television. The itemized bill will arrive later.

The day is coming, say futurists, when watching TV will be like going to a restaurant: You’ll make selections from an extensive menu of programs on specific “pay-per-view” channels and get billed only for the shows you order. In fact, that day may be closer than many viewers realize.

Pay-per-view channels are available in about 10 million homes throughout the country. That figure is expected to grow to 19.2 million homes in 1992 and 46.7 million in 1997, according to Paul Kagan Associates, the Carmel-based media research firm.

Though the selection of programming on PPV channels is limited to movies and occasional sporting and musical events, the variety of shows and number of channels are expected to grow along with the number of PPV viewers. And while the PPV industry took in revenues of $211 million in 1987, according to Kagan, it is expected to gross $1 billion in 1992 and $4.1 billion in 1997.

“Pay-per-view will fundamentally restructure the whole television industry,” boasts Hal Krisbergh, president of the General Instrument Corp.’s Jerrold Division, which owns a PPV network called Cable Video Store.

“We’ve spent the past four years setting the groundwork for pay-per-view,” says Jeffrey Reiss, whose Reiss Media Enterprises co-owns the Request Television service. “We’re going to start experimenting with new programs that people haven’t even thought of yet.”

But fulfilling its promise is not going to be easy for the PPV industry--especially if the past is any indicator. A slew of marketing, technical and programming problems have kept pay-per-view from success while the pay cable and home video industries, which emerged at roughly the same time, have radically altered the entertainment landscape.

It’s not hard to see why pay-per-view--which has spent more than a decade waiting to be the next big thing in the entertainment industry--is still waiting.

“I literally spent the whole weekend trying to watch ‘Mystic Pizza’ on my pay-per-view channel,” moaned Long Island resident Ed Bleier. After playing detective to track down a schedule for the channel, he discovered that “Mystic Pizza” would not run at a convenient time anyway. In the end, he decided to rent the movie from the video store.

What made the experience particularly exasperating for Bleier is that he is president of the Warner Bros. division that runs the studio’s pay-per-view operations. Without venturing beyond his living room, the executive could see why the pay-per-view industry is still waiting to turn a profit.

The business operates like a sort of hybrid of pay-cable channels, such as Showtime or HBO, and a video store. Customers of PPV channels are given a programming schedule composed mostly of movies, with some music and sporting events included. But rather than just switch on the set to see a show, PPV customers must order each program in advance. It’s akin to renting a video and having it faxed to your house. Prices for movies hover in the $4-$5 range while concerts and sporting events generally cost between $15 and $35.

A handful of companies dominate the industry. Viewers Choice, which has two channels that reach 5.6 million households, is the largest. Request Television reaches 4.5 million homes, followed by Cable Video Store, which reaches 850,000 cable buyers. On Dec. 1, the Playboy Channel will convert to a pay-per-view service called Playboy at Night, initially reaching an audience of about 2.3 million homes. (These figures total more than the PPV universe of 10 million because some cable operators offer more than one PPV service.)

Warner Cable gave the industry its start in 1977 when it launched an experimental cable system called QUBE with eight pay-per-view channels in Columbus, Ohio. But despite QUBE’s ambitious plans, the system never took off. The industry languished for years until Viewers Choice and Request were launched in 1985. Request was backed by the major studios, which felt they had been shortchanged by pay cable and didn’t want the same to happen with PPV.

“When Hollywood funded Request,” says an industry insider, “HBO was so big and paying so little for their films, they said, ‘I don’t want to miss the boat this time.’ ”

The studios, which are prohibited by law from owning anything collectively, agreed to rent satellite time from Request to send their films to cable systems. But they struck their own deals with the cable companies to distribute the programming. Rather than take a flat fee for leasing a film, as they do with broadcast television and pay cable stations, they arranged to take 50% of the income from each PPV sale.

But that move added to the simmering feelings of distrust between the movie makers and the cable industry. A group of major cable operators, concerned about having the fledgling PPV industry dominated by the studios, launched their own PPV network in 1987. It merged with Viewers Choice last year.

The factional split has caused tensions. “Half of Hollywood does not deal with Viewers Choice,” says Jim English, that network’s vice president of programming. Warners, Paramount, Universal and 20th Century Fox all sell films through Request, but not Viewers Choice. But the chasm between the two sides may be ending. Last month, the Walt Disney Co. broke the barrier, becoming the first studio to buy part ownership of Viewers Choice.

“Disney bought in,” says English, “to demonstrate to the cable industry that Hollywood is not a two-headed monster and to demonstrate to Hollywood that cable is not a two-headed monster. The value for Disney is that they have a hand in both Viewers Choice and Request.”

Although pay-per-view programming consists largely of movies, it’s the boxing and wrestling events that have garnered attention and cash for the industry. Last April’s Wrestlemania V grossed $22.8 million at $24.95 per home while the June, 1988, Spinks-Tyson fight brought in $21 million at $34.95 a pop. Sugar Ray Leonard, Hulk Hogan and their combative brethren are the carrots that have kept PPV moving forward. But executives realize it will take more than a few beefy guys duking it out to launch a revolution.

This summer, PPV will try to attract millions of viewers with special rock concerts, most notably the Who’s guest-star-laden production of “Tommy” from the Universal Amphitheater on Aug. 24. The Rolling Stones also are negotiating to perform a special PPV show near the end of their upcoming U.S. tour. And PPV executives are looking for other types of events that could expand their muscle beyond sports.

What makes the whole PPV system possible is the new technology of “addressable” converter boxes that enable cable companies to add or delete services to particular homes without leaving the office. The old decoder boxes--which are still used in most cable households--require cable companies to dispatch a technician each time someone wants to change their service.

But although more and more addressable converters are being installed, many cable operators are still using primitive methods to take pay-per-view orders from their customers. Most require viewers to call an operator at the cable company well in

advance of the program they want. Customers are often placed on hold or find repeated busy signals--particularly for the most popular events. It’s a system that prevents spontaneity and therefore discourages viewers from ordering programs, industry executives say. Warners’ Bleier complains that PPV customers have to “work their way through layers of operators and give such esoteric information as their cable billing number. Who knows their cable billing number?”

“I called for the Tyson-Spinks fight three weeks in advance,” recalls Tim Clott, executive vice president of video and pay-TV operations for Paramount. “And I had to wait 20 minutes on the phone.”

The ordering problem is also being solved--slowly. Some cable operators are installing a system developed by AT&T; called Automatic Number Identification (ANI), which enables cable customers to dial an 800 number that takes orders by computer. An even more advanced--and less widely used--”impulse” ordering system allows customers to order programs simply by pushing a few buttons on a special remote-control device. Programs are delivered within 10 seconds.

Customers who can order by push button are more likely to buy PPV programs than those who don’t, research shows. Naturally, PPV executives are urging cable operators to blanket the country with impulse and ANI ordering systems. So are the film studios, who gain from each PPV purchase. But cable companies have been resistant because of the immense cost.

Providing top-of-the-line pay-per-view equipment for all cable customers “is not a good business decision,” says Bill Hoagland, vice president of marketing for United Cable, which provides cable service to nearly 90,000 homes in the Los Angeles area. Instead, United is trying to target those customers who are likely to be heavy pay-per-view users. The cable company, which offers PPV channels to all its customers, installs the advanced “impulse” ordering device in homes that subscribe to two or more pay cable channels. “Those are the movie lovers,” he says. “They’re the same people who are standing in line to see ‘Batman.’ ” United provides impulse ordering to about 15% of its customers now and expects eventually to reach 30%. Not the best news for PPV, but a step in the right direction.

While the studios have worked to develop pay-per-view as another way to make money from their movies, they have been under pressure from home video retailers not to promote it too heavily. The problem has a familiar ring to it. Network television, pay cable and home video were all seen as threats to the movie business when they first appeared. PPV is viewed differently. No one thinks it will undermine the profits from theatrical film releases. The studios are extremely protective of that aspect of the business because it has the most profit potential--they make money on every person watching the movie. And research shows that moviegoers don’t want to give up the pleasures of eating popcorn in a dark theater while they watch a new film. But while PPV is not considered a threat to theaters, home video retailers believe the fledgling industry could cut deeply into their profits.

Few outside of home video agree: “Pay-per-view will never kill anything,” sneers one industry analyst. Nonetheless, home video lobbyists convinced the studios to delay the pay-per-view release of movies until at least 30 days after they have been released on video. When home video talks, the studios listen. “The reason is obvious,” says Rick Karpel, regional director of the Video Softwear Dealers Assn. “We make more money for the studios than pay-per-view.”

The studios can theoretically make more money from PPV than home video. With cassettes, they only make money on each tape they sell, not from the lucrative rentals. But until PPV companies can gain economic clout, they are not likely to get movies before they go to video.

Part of the video retailers’ concern is that VCR users will record the films and not rent the tape. That has prompted the studios to experiment with anti-taping systems for cable companies. As part of the experimentation, two cable operators--one in Massachusetts and one in Wisconsin--are using an anti-copying device. In exchange, the studios are providing them with movies for PPV release the same day they debut on video.

If the obstacles hobbling pay-per-view are overcome, the payoff could be enormous for both the entertainment industry and viewers. Scientists foresee the day when viewers will be able to order from a seemingly limitless catalogue of programs. “Television sets will be more like computers,” says Richard Solomon, research analyst at the Massachusetts Institute of Technology’s Media Laboratory, where scientists are busily designing the TV of tomorrow. “Theoretically, one would be able to store all the movies and television programs ever made,” says Solomon. A wealth of new kinds of programming may also be available. Narrowcasting--the notion of producing programs that interest only a small segment of viewers--could finally become feasible.

Although the technology to store and retrieve countless programs at will is not expected to arrive in the near future, pay-per-view executives expect to transform television soon. PPV will offer viewers a chance to go places they couldn’t otherwise, predicts Reiss of Reiss Media Entertainment, such as “a major auction from Sotheby’s.” “They could bid by phone with a catalogue,” he says. “They could see the opening of a Broadway show. Hundreds of thousands of people would like to be part of something like a World’s Fair. If Prince Charles and Diana were getting married now, it would be on pay-per-view.”

Krisbergh of Cable Video Store thinks NBC’s plan to run portions of the 1992 Olympics over pay-per-view is a sign that the business has arrived. NBC is expected to offer viewers the chance to watch some sporting events from start to finish on PPV, since the network itself can only air selected portions of the competitions. Basketball fans, for example, might be able to watch hours and hours of the sport.

Pay-per-view is making headway “and clearly the networks agree,” says Krisbergh. “The networks are actually facilitating it.” He envisions 20 new PPV channels during the next 10 years. In addition to movies and event programming, the executive sees an avalanche of “niche product”--programs with limited target audiences such as bass fishermen, doctors or real estate agents.

He sounds almost giddy as he describes the future. “A lot of people say to me, ‘That’s great, Hal, but when’s it going to happen?’ I say it is happening. When NBC decides to put the Olympics on pay-per-view, that’s a statement.”