Cinema Canada (Aug 1976)

One Rand Corporation study has projected $2 billion a year in total billings as forseeable, but it’s been slow in coming. How Pay TV Developed Earliest actual experiments began in 1950 in the U.S. but subsided while the courts debated whether this actually constituted ‘“‘broadcasting” within the meaning of the Communications Act. This resolved in 1962, the FCC (Federal Communications Commission) authorized the Hartford, Connecticut, Pay TV experiment. Via over-theair transmission, a program selection consisting mainly of feature films plus a few sporting events was shown. In Canada, Etobicoke was the site of another experiment, but this time cable was the means of distribution and the subscribers placed coins in a box to view the programs. Both experiments were variously labelled as failures; however, a number of factors were not taken into consideration. In the Hartford case, a great deal of experimenting was done with the content and the method of metering subscriber usage which was rather awkward. In Etobicoke, the pay system called for the installation of cable for Pay TV alone, rather than Pay TV being an additional source of revenue to a cable which was already paying its way by providing a basic service of distant signals. During the next few years in the U.S., court actions to prohibit Pay TV were brought against the FCC by the motion picture theatre owners who felt the medium threatened their livelihood and also by the conventional broadcasters who not unrealistically feared that their choicer programs would be lured away to the new medium. A shift from advertiser-supported television to consumer-supported television was in the making, and although fewer viewers might be reached, the economics were such that vastly more monies could be spent for the content. Although the U.S. theatre owners eventually lost their case, the conventional broadcasters fought doggedly for the banning or restricting of Pay TV to prevent the programs now aired for “free” being “siphoned” off leaving the consumer (with his large investment in a TV set) to watch the leftovers. California citizens at the broadcasters’ behest even passed a referendum — later reversed — forbidding Pay T'V in their state. As we entered the ’70s the FCC hoped to resolve the arguments by issuing a set of anti-siphoning regulations designed to protect the existing programs on advertisersupported TV (and the consumer’s investment in his set) while “‘permitting new uses of the broadcast waves.”’ In essence, these regulations required that a pay television operator could use only feature films younger than three years; or older than ten; or foreign films; or films for which the broadcaster had no interest. By and large, sports events shown on Pay TV could not include those currently being broadcast or special sports events such as the Olympics if they had been broadcast within the last ten years. In total, feature film and sports events were not to occupy more than 90% of the program schedule. In spite of the huge revenue potential and with the legal problems resolved, over-the-air Pay TV, until recently, has been rather slow to develop for a number of reasons. Feasibility studies indicated that the public was not particularly interested — probably due to a general ignorance about what Pay TV was or what it could offer. Really efficient and secure (uncheatable) systems for broadcasting scrambled signals, unscrambling them, and metering the consumer’s viewing of each program have only now become available. Finally, Pay TV licenses were restricted primarily to those broadcasters in large cities who were presumed to be in financial difficulties. They therefore lacked the adequate financial resources to start up and exploit the new medium. Now that the technical problems have been solved and with the demonstrated interest of the consumer, several large companies, e.g. The Wometco Corporation, are moving in and the full impact of over-the-air and probably . pay-per-program Pay TV will shortly explode on the American scene. The Current U.S. Pay TV System However, a variant of Pay TV which makes use of the established U.S. cable systems has surged ahead. In essence the cable subscriber gains unlimited viewing of a special channel of selected programs for a monthly fee (average $8.00) additional to the basic fee (average $7.00). This system is referred to as “‘pay-per-channel”’ and curiously in our Canadian discussions this approach has become synonymous with Pay TV, and by inference synonymous with cable. In this context it should be noted that the development of cable systems in the United States has differed markedly from Canada. The U.S. major cities with the exception of Manhattan are not cabled. Like Canada, the extension of cable and the willingness of the consumer to subscribe, has depended on the importation of distant signals. For Canadians this has meant U.S. stations. For the U.S. consumer this has meant stations not otherwise available in the community. Of the large U.S. cities, at this time, it is only in Manhattan that there is sufficient consumer demand for cable as a means of overcoming reception problems due to industrial interference and “ghosting” to warrant the expense of a cable system. (However, newer and cheaper technologies involving multi-channel omni-directional microwave — known as MDS -— transmitting the TV signals to individual buildings for internal distribution by cable, or even homes, may advance rapidly.) The apparent plan in the United States, therefore, is for Pay TV to be distributed over the air in most major cities and by cable in the smaller centers. In Canada it is the major centers that are cabled while the smaller communities (and rural areas) are not. How Pay-per-Channel Developed Although most U.S. cable operators were making money, in general they were working with smaller systems and with lower ratios of homes subscribing to homes passed by cable than their Canadian counterparts. Therefore the attraction of providing other services to produce revenue, since the use of additional channels (cable can carry up to 40 channels) meant slight or negligible further cost, was very enticing. Rapidly a number of program suppliers came into being who would either supply a “menu” of programs for a single channel or negotiate on behalf of the cable operator with the Hollywood producers for the rights to program a channel of pay television. Already a number of cable operators had had to offer a channel of feature films in addition to the distant stations in order to gain basic subscribers. Now with better product available they were able to charge an additional fee for a pay channel. In general, this amounted to $8.00 a month of which the cable operator kept approximately half and the program producers and suppliers took the rest. $4.00 a month would not pay for a cable system but as an additional revenue over and above the $7.00 subscription received for the basic service, it represented a highly profitable extra. This rather primitive Pay TV then depended on an existing cable system programming one or possibly two channels for which the viewer paid $8.00 13 / pay-tv