PPV future’s strong, per Zelnick

Within 10 years, pay-per-view will be the primary distribution medium for movies on television, according to Strauss Zelnick, president and chief operating officer of 20th Century Fox.

Speaking at the Cable Television Administration & Marketing Society’s fourth annual Western regional PPV conference, the studio exec predicted the arrival of an era of movies on demand. Within five years, he said, PPV will become a “big business,” roughly equal to today’s pay-TV business.

But that doesn’t mean he foresees a day when a studio will release a major film on PPV before its theatrical release.

By definition, the theatrical motion picture experience is superior to the TV experience, said Zelnick. Until that changes, the cable industry is “kidding itself” when it entertains fantasies along those lines. He described this assessment as offering “a dose of reality” to the conference attendees.

Before Zelnick made his bullish predictions about PPV’s eventual growth, he used the CTAM forum to point out why he believes PPV’s ascent has been so long in coming.

PPV, in a primitive form, has been around since the late 1950s. But despite predictions that it would explode into a $ 400 million annual business by 1990, it remains a “tiny” piece of the action for Hollywood studios, Zelnick said.

Gross consumer movie revenues from PPV in 1992 have been estimated at $ 140 million to $ 170 million, said Zelnick. That compares to the estimated $ 12 billion for homevideo.

At Fox, he added, PPV represents less than a third of 1% of its total motion picture revenues. In comparison, pay-TV makes up 10% and homevideo a hefty 40% of that total.

Limited channel capacity

One key problem in PPV’s development: Limited channel capacity. With the average number of cable channels per system at 36, only one or two of those channels are PPV channels, he said.

That means studios have to share channels on PPV, leading to what the exec terms a “hodgepodge scheduling format,” and in turn, “a medium that is an amalgam of pay-TV and PPV.”

Consumer awareness remains low, especially for movies, and PPV is not “user-friendly,” in Zelnick’s estimation. “Consumers are confused as to how to order and when movies are playing,” he said.

The result is that there is still a relatively small number of addressable households able to receive PPV — approximately 20 million, or only 30% of total cable homes.

But with aggressive investment to increase channel capacity and simplify ordering technology, PPV can move toward achieving its true potential, Zelnick believes. At the same time, the cable industry must do a better job at educating consumers about PPV’s availability and creating consumer demand.

More advice to the PPV industry came from Pete Warzel, president and chief exec of the United Artists Theater circuit. He doesn’t think PPV represents a threat to theatrical exhibition, but he believes it will be a potent force and give homevideo “a run for its money.”

At a luncheon talk, the exhibitor urged PPV practitioners to spend time “developing leverage” with movie studios. In 1991, PPV revenues from movies were only $ 33 million, he said. But in 10 years, industry projections put the business at $ 2 billion annually–from movies only. Event revenues will likely drop, so the PPV industry’s future is in movies, Warzel believes.

“Make no mistake,” he said. “You are a critically important window of distribution for the studios. They know it and you should turn it to your advantage.”

He continued: “If you can offer an extensive library of films through viewer-controlled cable television, you’ll be able to save the studios literally billions of dollars in distribution costs, not to mention marketing and advertising expenses.

“You could become the most lucrative window in the post-theatrical exhibition market. Especially as you erode the video rental market, there will be a revenue shift and a power shift to your benefit. It’s an opportunity you should be spending a lot of time cultivating and planning,” Warzel advised.

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