Pay-Per-View TV Seems to Be the Future for Sports

The numbers are beginning to add up to a new way Americans watch their sports. The three major heavyweight fights of 1991 -- Evander Holyfield against George Foreman and two bouts between Mike Tyson and Razor Ruddock -- generated more than $125 million from pay-per-view television.

And soon what is expected to be the biggest payday of them all -- Holyfield against Tyson for the heavyweight championship on Nov. 8 in Las Vegas -- could total as much as $100 million in gross revenues, most of it from pay per view. These payoffs may be the norm in the electronic sports arena of the 21st century.

Pay per view television has been around for most of the last decade. But only recently have more and more Americans been able to use a technology that allows them to view events -- boxing and wrestling matches, first-run movies and concerts, for example -- for a set fee from their homes by dialing their local cable companies for instant access.

And now, with many more channels on cable leading to a shrinking network audience and fewer advertisers willing to support free over-the-air television, sports, particularly pro football and the Olympics, are looking very closely at commercial-free pay per view as one possible answer to coping with huge player salaries and what are expected to be decreasing rights fees paid by the networks for programming. And the local cable companies will benefit from a boom in pay per view because each shares in the receipts of the events it offers.

And so, it is no wonder that Holyfield promoter Shelly Finkel says: “It’s only going to get bigger, and not just boxing. As network television gets smaller and advertisers continue to cut back, the future will be pay per view. It just seems so obvious.”

For the fight crowd, the time to cash in is now. Holyfield-Foreman in April grossed an all-time record $55 million, according to TVKO, the pay-per-view division of Time-Warner Sports that also will carry Tyson-Holyfield. The first Tyson-Ruddock fight in March earned $35 million, and the rematch two weeks ago probably generated $40 million, although final figures won’t be in for another two weeks, according to Showtime Entertainment Television (SET), a division of media giant Viacom. The Holyfield-Buster Douglas fight in October earned $38.6 million.

“We’re talking about monster events,” said Scott Kurnit, president of SET. “A boxing match that today generates $50 million will generate $150 million five years from now. Will it be the same for other sports? I think you’ll see some of it. But boxing is unique. It’s such a fluid, unorganized sport. You’re only as good as your fighter. There’s no longevity in deals. There’s no consistency.”

Still, every major sport -- college and professional -- is watching the pay-per-view business closely, particularly the increasing number of addressable homes. The growth is estimated at about 2 million a year, a rate that could climb higher over the next decade.

With those audience numbers clearly on his mind, NFL Commissioner Paul Tagliabue announced in February the league would begin experimenting with pay per view in the 1993 season, offering fans in one market a chance to pay for games that ordinarily would not be televised in their area. He took great pains to emphasize that this would not take away any games from free television. He later testified before Congress that he did not envision the Super Bowl going to pay per view, at least through the end of the century.

“Paul was talking about a concept,” said Val Pinchbeck, the NFL’s vice president of broadcasting. “I think there’s a perception that we already have a definitive plan, and we don’t. We haven’t progressed beyond the original concept. Originally he said it might happen in 1992, but now that’s unrealistic. It will be 1993 or thereafter. Right now, we are concentrating on our network package. That is our priority, not pay per view.”

For the 1992 Summer Olympics NBC will offer a subscription pay-per-view package to viewers in addition to the reguarly scheduled programming on free television from Barcelona.

The network will have 1,080 hours of pay-per-view Olympic programming, half of it commercial free, that will include coverage of all major events in their entirety, from preliminary competition through the medal rounds. Many of the lesser-known sports also will be included in the pay-per-view telecasts.

NBC has three Olympic packages to choose from -- the $95 “bronze” that includes the first seven days of the games or weekend days only; the $125 “silver” that includes the entire 1,080 hours of programming and a 50 percent discount on NBC catalogue merchandise; and the $170 “gold,” which includes the same programming and discount as the silver as well as a commemorative Olympic book, an Olympic pin set and a videotape of the Games’ highlights.

NBC is joining Cablevision Systems Inc. in the Olympic pay-per-view venture, allowing the network to lay off $100 million of its $401 million rights fees to that company. By the time the Barcelona Games begin, NBC estimates that 20 million to 22 million U.S. households will have pay-per-view capability, and NBC officials say they are expecting a 6 to 10 percent “buy rate” for the Olympic package. A 10 percent “buy rate” based on 20 million homes with pay-per-view capability would mean an audience of two million, paying what NBC estimates will be an average package price of about $130 per home. The quick math tells you that would mean $260 million in pay-per-view revenues, against costs of $100 million for the rights, $55 million for programming and production, $40 million for marketing and $5 million in miscellaneous costs -- and a possible profit of $60 million.

“We’re doing this based on a deep-seated frustration the average sports nut has about the Olympics,” said Dick Ebersol, president of NBC Sports. “Something like 65 percent of the people who watched the 1988 games said they’d like to watch it in its entirety. On network television, to get all the high points, you have to show a well-crafted mosaic for the prime-time audience. And yet, there is nonstop, 12-hour competition for 16 days. A lot of people want to see that.”

Still, not everyone thinks there will be that much interest.

“In one sense, it’s great exposure for the Games,” said Barry Frank of Trans World Television, who worked for the Barcelona Olympic Committee as its chief negotiator for television rights fees. “But you’re also opening a Pandora’s box. It’s great to see the finals of the 100 meters, not so great to see 14 heats of it. And NBC has to be concerned about diluting its prime time product.”

Mike Trainer, the Silver Spring, Md., attorney who made millions for Sugar Ray Leonard in network, cable and pay-per-view deals, also is skeptical.

“Will people take a whole week off just to watch the Olympics, because that’s really what you’ve got to do,” Trainer said. “I don’t think so. People want the American boxer against the Cuban, they don’t want the other stuff. ...

“Pay per view works with a marquee name. The name right now is Tyson or Foreman. But there’s no steady audience for a monthly boxing show on pay per view with guys you wouldn’t even have seen on the network shows.

And of course, there is also the specter of the government moving in to regulate the pay-per-view industry, particularly if free events suddenly can be seen only for a price.

Rep. Ed Markey, D-Mass., chairman of the House Telecommunications and Finance subcommittee, already has let it be known he will be watching developments in pay per view closely.

Still, the two major players in the pay-per-view boxing arena -- TVKO (Holyfield’s pay per view outlet) and SET (aligned with the Tyson camp) -- firmly believe that it’s only a matter of time before all sports start reaping pay-per-view dividends.

“People have been paying for television for a long time anyway,” said SET’s Kurnit. “What’s the difference between pay per view and paying for HBO or Showtime. Pay per view is just another way to pay for television. It hasn’t siphoned off programming, it’s added to the choices.”