The pay-per-view telecast of a live, new Broadway production moved closer to becoming a reality Tuesday when an arbitrator ruled that the producers of “Damn Yankees” can make participation in PPV a condition of employment in the show. The arbitrator is expected to rule by week’s end on how much actors and stage managers are to be compensated in the event of such a performance.Under the ruling, the producers’ contract with Actors’ Equity for the show may require actors and stage managers to participate in a pay-per-view telecast much as they now agree to perform in cast recordings and television commercials. The producers of the show, primarily Polygram Diversified Entertainment, hailed the ruling, saying it will open up a new revenue stream for Broadway investment and provide an additional source of income for performers. They said that cable operators are anxious to add such programming to the sports-dominated pay-per-view mix, and that even a small buy among viewers could be profitable. But the issue of pay-per-view has long divided the theater world, and not just along producer-vs.-union lines. Many producers share the same fear as the unions: any telecast of a running Broadway show — whether on broadcast TV, cable or pay-per-view — will hurt the box office. The feelings are so strong that they have so far prevented a real test to actually measure the impact. “The empirical evidence has been lacking,” said Polygram vicepresident Jeff Rowland, adding that the telecast would be offered about a week before the June 12 Tony Awards broadcast and would sell for between $ 19.95 and $ 30, depending on the level of sponsorship. Small auds The only previous show to have been offered on pay-per-view was “Sophisticated Ladies” in 1982, near the end of its run and at a time when the pay-per-view universe encompassed about 2 million homes — a tenth of what it is today. The film of the Broadway production of “The Pirates of Penzance” was also offered as a pay-per-view event; both outings drew insignificant audiences. More recently, Polygram has led the fight to produce a pay-per-view performance of a high-profile Broadway show. Last year the company expected to present “Jelly’s Last Jam,” which starred Gregory Hines and in which they were a major investor. Deals were made with cable operators and a telecast date was announced, but the plan was ultimately defeated by opposition within the industry. Arbitration was planned Polygram is the major investor in “Damn Yankees,” to the tune of about $ 1 million, or about 25% of the total capitalization. The show, a revival of the 1955 George Abbott/Douglas Wallop/Richard Adler/Jerry Ross musical starring Bebe Neuwirth and Victor Garber, is slated to open March 3 at the Marquis Theater. When Actors Equity again resisted Polygram’s plan to offer a pay-per-view performance, the company demanded arbitration. Both Equity and the arbitrator, Columbia University law professor Walter Gelhorn, declined to comment on the case yesterday. Because of the “Jelly’s Last Jam” experience, Rowland said he waited until the ruling before making any deals with cable operators. “Our hope is that this will bring Broadway to a constituency that can’t access it,” Rowland said, “whether because they cannot afford the price of tickets or live too far away.” While the company has other interests in the show besides the telecast, Rowland added, “our involvement in Broadway has always been to be more than just a source for investment.” ‘Is dilution worth it?’ But Bernard Jacobs, president of the Shubert Organization and a longtime opponent of pay-per-view, said “you’re either in the theater business or in the subsidiary rights business. There’s more than just compensating actors involved — there are stagehands, ushers, wardrobe people,” as well as, he added, venue owners such as Shubert. “Is your dilution worth it?” That is exactly the question Polygram and its partners hope to answer in June.