Hughes Communications Inc. reached an important milestone last week when it secured a pay-per-view output agreement from a major studio for its fledgling direct broadcast satellite service.
Paramount Pictures is the first to sign on with the service, DirecTv. Also joining up is the Disney Channel, which will be heavily promoted by Hughes.
DirecTv is slated to launch the first of two high-powered satellites in December, with services starting in March 1994. Subscribers would need to purchase an 8-inch satellite antenna, a TV set-top box and a remote for around $ 700.
At a press conference at the Consumer Electronics Show in Las Vegas, RCA, a unit of France’s Thomson SA, previewed the hardware for retailers.
But it’s Paramount’s participation that gets the attention.
Hughes will be offering movies every 30 minutes, and hits every 15 minutes, on one or more of its 150 channels. Movies would be available in the same window as with homevideo releases.
“The agreement will provide our customers with immediate access to a wide variety of quality motion pictures,” said Eddy Hartenstein, president of DirecTv.
“We’ve been looking at pay-per-view for a number of years now as the promise of the future, and it’s been kept that way till now,” said Robert Klingensmith, president of Paramount’s video division.
50 PPV channels
“Hughes will provide upwards of 50 channels of PPV, with a majority of those being movies. For us, consumers would have as much flexibility as possible to buy our services.”
According to Kagan & Associates, the Carmel-based research firm, PPV reaches an estimated 20 million homes through cable and satellite, generating annual revenues between $ 60 million and $ 70 million by showing movies at $ 5 a pop.
Higher ‘buy rate’
The benefit of PPV channels for studios, said Klingensmith, is that consumers appear to have a higher “buy rate” than with typical cable services. A buy rate is the number of households that purchase a film for a separate fee when offered by the cable companies.
While Paramount and MCA were partners in a satellite PPV service called TVN until last year, Klingensmith found that “we had a 10 to 12 times greater buy rate than with cable.”
Since announcing its plans last April, Hughes, a subsidiary of General Motors Co., said it expects to spend $ 500 million in launching the new service. Hartenstein figures he can attract 10 million by 2000. Hughes appears to be the first to reach its goal since rival SkyPix Corp. was forced into bankruptcy last summer.
Another service, to be offered by Hubbard Broadcasting Inc., also is expected to launch sometime next year.