BUSINESS

A NEW TV ERA

PAY-PER-VIEW TELEVISION THREATENS TO LURE CUSTOMERS AWAY FROM VIDEO RENTAL STORES

BRENDA DALGLISH September 9 1991
BUSINESS

A NEW TV ERA

PAY-PER-VIEW TELEVISION THREATENS TO LURE CUSTOMERS AWAY FROM VIDEO RENTAL STORES

BRENDA DALGLISH September 9 1991

A NEW TV ERA

BUSINESS

PAY-PER-VIEW TELEVISION THREATENS TO LURE CUSTOMERS AWAY FROM VIDEO RENTAL STORES

This week, as thousands of Canadians gather in front of their televisions to sample the latest innovation in pay TV, Donald Hinds will brace himself

for an unusual problem. As vice-president of operations in Ontario for Toronto-based Maclean Hunter Cable TV, Hinds is a key figure in the Sept. 5 launch of Viewer’s Choice Canada, a new service that allows customers to choose from a menu of movies and other programs, paying only for what they want to see. Unfortunately, Hinds says, his counterparts in the U.S. pay-per-view industry have warned him that they sometimes have to summon police to their stores to break up brawls among rowdy wrestling enthusiasts. The fans, anxious to rent pay TV decoders so that they can watch wrestling

matches, apparently turn nasty when the supply of decoders runs out. “If you’ve got hundreds of people waiting to get decoders at the last minute, you can have a real problem,” Hinds said. “People get ugly.” Still, he predicted that the new system will provide an important asset to Canada’s cable industry.

According to some industry insiders, payper-view is actually the way of the future for pay television. In the United States, where payper-view began in the late 1980s, the service now reaches an estimated 12 million homes, about 13 per cent of the total television audience. A year ago, Edmonton-based Allarcom Pay Television Ltd. began a pilot pay-per-view service that now reaches about 12,000 homes in Regina, Saskatoon and Yorkton, Sask. View-

er’s Choice, the newest operation, will eventually be available to cable TV subscribers in several major cities in Ontario, Quebec and the Atlantic provinces served by Rogers Cablesystems Inc. and Maclean Hunter Cable TV, a subsidiary of the Toronto-based media company that publishes Maclean’s. By late 1992, industry executives say, similar services should be up and running in cities and towns across the country.

To gain access to pay-per-view, cable subscribers have to first have a so-called addressable decoder—a small box that enables cable companies to direct programs only to the customers who pay for them. Many cable customers already have addressable decoders, which are used to descramble conventional pay TV channels, such as First Choice and the U.S.-based Cable News Network, for a fixed monthly fee. But with pay-per-view, cable customers will be able to dial a special telephone number and place orders for specific programs. The cable company’s computer will then automatically descramble the pay-per-view signal for the duration of that program. Viewer’s Choice plans to offer its customers a selection of four or five movies a day and major sports and entertainment events about once a month. But that is just the beginning. In the next few years, cable compa-

nies plan to introduce several new transmission methods that will give them the ability to carry many more channels. That could lead to the introduction of hundreds of pay-per-view services. “By the year 2000, there will be more channels than you can count,” said Colin Watson, president of Rogers Cablesystems. “You will be able to sit in your home and say to your television set, ‘I am going to the Galapagos Islands—show me everything you’ve got on them.’ You could then scroll through a menu and choose what you want to see.”

In the long run, pay-per-view television will almost certainly cut into the market for home video rentals. Rather than driving to the local video store to rent a movie and then driving back to return it, consumers can simply consult an information channel to find out which movies are available. In some U.S. cities, it is not even necessary for viewers to phone in their requests. Instead, consumers place orders by pressing buttons on remote-control boxes supplied by their local cable company.

Even so, home video executives insist that they do not expect to lose much business to pay-per-view. Video rentals are now the largest single source of income for U.S. moviemakers, generating more revenue for the major Hollywood studios than either theatre releases or conventional pay television. To shield the video rental industry from direct competition, the major studios plan to release movies for home rental 45 days before they are available

on pay-per-view—a practice they already follow in the United States. At the introductory price of $3.95, as well as provincial tax and GST, movies will also cost more on pay-per-view than in most video stores.

In addition, video stores currently carry a far greater selection of movies and special programming than will be available through payper-view. “We offer customers a shopping experience,” said Clifford Horwitz, president of Oakville, Ont.-based Jumbo Video Inc., which has 67 stores across Canada. He added that Jumbo Video, like several other large chains, has abandoned the “lending-library mind-set” that used to characterize video rental outlets and has installed popcorn machines and giant-screen TVs in its stores to attract customers.

The arrival of pay-per-view could also help the conventional pay TV industry. Astral Inc., the Montreal-based communications company that controls 51 per cent of Viewer’s Choice, also owns First Choice, the pay television movie channel. Says André Bureau, president of Astral’s broadcasting group: “Our pay TV subscribers are film buffs. Not only do they subscribe to pay TV, some of them rent another four or five films a month.” Bureau added that he expects pay-per-view to work in favor of the pay TV channels by increasing the number of decoders in Canadian households. Currently, about 75 per cent of Canada’s 9.6 million households subscribe to cable. Of those, just 18 per cent rent a decoder and the remote converter needed to receive pay television.

But the advent of pay-per-view will likely produce some lasting changes in the way people watch television. In the United States, professional boxing matches and wrestling tournaments are among the most popular draws on pay-per-view, enticing viewers to pay as much as $45 per event. But industry representatives say that the economics of pay-perview will change dramatically in the future, when more people have decoders in their homes. Says James Thompson, vice-president of the cable sports channel TSN: “Today, the NHL playoffs, the Grey Cup, the Super Bowl are all available free on television. That might not be the case 10 years down the road.” TSN and Rogers Communications Inc. are Astral’s two partners in Viewer’s Choice, with slightly less than 25 per cent each. Thompson says that TSN decided to invest in pay-per-view because of its future potential. “Who could have guessed 10 years ago that people would want to watch a 24-hour sports channel? And yet TSN has turned out to be enormously successful. Payper-view is the next logical step.”

Ultimately, Thompson acknowledges, payper-view’s future will depend on audience reactions. He added: “What will a sports fan pay to watch the seventh game of a Stanley Cup playoff? That’s the question.” So far, no one in the Canadian television industry knows the answer. But wrestling fans south of the border have already demonstrated a willingness to fight for the right to pay.

BRENDA DALGLISH