Cinema Canada (Aug 1976)

ae PAY-TV The Cable Viewpoint by Colin D. Watson The cable television industry welcomes Madame Sauvé’s recent initiative on Pay TV. As an industry we have been encouraging the development of the pay concept for many years. It has always seemed logical to us, particularly considering the increasing penetration of cable, that the cable plant has tremendous potential to provide not only off-air service, but also discretionary services of a wide variety. One such discretionary service is a movie and theatrical event channel. Another might be a “frame grabbing” data retrieval channel. A third could be a “university of the air’ channel, which, for a fee, allows viewers to take credit-bearing courses in their homes. The variety of programming material which could be offered to cable subscribers on a discretionary ‘‘pay to view” basis is wide indeed. The Canadian cable industry is excited about participating from the outset in a venture that may provide a vital stimulant to the Canadian independent production industry. Madame Sauvé’s speech on pay television at the June CCTA Convention stressed that: ‘It (Pay TV) must ensure the production of high quality Canadian programmes that Canadians will watch. ”’ Madame Sauvé’s speech also requires Pay T'V to: “ensure that programmes are produced in Canada for international sale”’ and ‘““.. provide a range of programming which does not duplicate that now offered by broadcasters and must do so without siphoning programmes from the broadcasting system.”’ These are worthy and realistic objectives for Pay TV; however, we in the cable industry believe that a fourth objective should be added: “Tt must work.” In the context of “making it work’’, it is useful to examine the U.S. experience on Pay TV. The developments in Pay TV south of us have been well documented and reported. While little statistically valid analysis has been undertaken on the U.S. experience, some generalizations can be made that are relevant to those of us hoping to participate in the development of Canadian Pay TV. These are as follows: e At a price of about $8/month approximately 25% of the subscribers on a cable system will try Pay TV. There appears to be a real resistance to higher-cost Pay TV by cable subscribers. e Once sold, a subscriber needs constant reselling to prevent disconnection. The disconnection rate is high. e@ The 1,000,000-odd U.S. pay cable subscribers are virtually all paying on a subscription basis rather than on a per-programme basis. Colin Watson is president of PTN, Pay Television Network Ltd., and vice-president of operations of Canadian Cable Systems Ltd. pay-tv/ 18 e@ First subsequent-run American movies is the only consistently successful programme fare to date. Live sports are also an attractive offering. e The pay channel should only carry material that has a high perceived value to the subscriber. ‘Filler’ material should probably not be used. e The pay channel should be operated more in the mode of a theatrical outlet than in the broadcasting mode, i.e. one or two events a day repeated over a series of ’ days. e There does not appear to be any significant siphoning or fragmentation as a result of the implementation of U.S. Pay TV. Pay TV induces extra viewing hours. e Different markets appear to require some different programming. What sells in New York does not necessarily sell in Kansas City or — putting it another way — New York City citizens have different tastes than those in Kansas City. e In markets with low cable penetration, Pay TV is helping to sell cable. Before trying to adapt the U.S. experience to the Canadian scene, it is worthwhile to examine some of the basic differences and similarities in the two markets. The following stand out: 1.Canada has much higher cable penetration than does the U.S. Hence, unlike many U.S. cable operators, the Canadian cable industry will not be able to subsidize Pay TV rates through increased cable revenues gained from an overall growth in cable penetration. 2.Pay TV in Canada must dedicate a certain percentage of gross revenue (15% has been suggested) to Canadian productions that, at least in the early years, will not have subscriber appeal sms acon’ to the imported product. 3. Canadian viewers are very much attuned to U.S.-style programming and from a marketing standpoint we can probably conclude that a successful U.S. pay programme format will be successful in Canada and vice versa. Insofar as the only consistently successful programming format on U.S. Pay TV consists of the provision of U.S. movies, we can conclude that this format should be used in Canada to initiate the development of pay cable and to subsidize the development of a Canadian independent film industry from the revenues thus generated. One might conclude after examining the U.S. experience on Pay TV that an economically viable Canadian industry capable of sustaining Canadian productions could never develop, i.e. the Pay TV revenues would be com ‘parable to those in the U.S., however, the product costs would be significantly higher. The creation of one national Pay Television Network, however, as a buying monopoly could avoid the dysfunctional buying competition that currently exists between major Canadian broadcast networks in competing for U.S. product, and thus free up programming funds for the acquisition of Canadian product. august 1976 ho hag RA ER A Bo oS met a