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It happened in Los Angeles, and the experimenter was ON TV. Ordinarily. ON TV charges its subscribers about $20 a month for programming. That includes movies and a selection of local pro and college sports. ON TV is not a cable service. It is known as subscription TV (STV), and to control its viewership, ON TV sends a scrambled over-the-air signal that is picked up and unscrambled by a decoder (a small box in the home). The system has more than 515,000 subscribers.
The night of Nov. 25,1980, ON TV offered its subscribers something extra, the second Leonard-Duran fight. But to receive it, viewers had to ante up $15 above and beyond their monthly subscription rate. About a minute before the start of the fight, an ON TV computer scanned the subscriber list to determine which sets would receive the fight. Some 165,000 L.A. fans sprang for the $15, which added up to a cool $2.5 million.
The next major test of pay-per-view comes up Sept. 16, the night Leonard fights Thomas Hearns for the undisputed welterweight crown. Main Event Productions, headed by Dan Duva, a New Jersey attorney, is promoting the fight. Main Event has guaranteed the fighters a total of $15 million. That's the highest purse in the history of boxing. Where will such a tremendous sum come from?
Duva estimates the live gate will reach $6 million and the closed-circuit broadcast in theaters will add another $30 million. He also figures to reap $15 million from an ad hoc network of pay-per-view audiences sitting in their homes. The creation of this one-fight network, which had never before been attempted on a national scale, hasn't been easy, because the technology of pay-per-view TV is in its infancy. Duva's network will be made up of at least 20 cable and STV systems in 15 cities. Those 20 represent 95% of the households that subscribe to systems with pay-per-view capability. That comes to no more than one million homes.
Even though pay-per-view is limited now, Duva thinks it will soon mushroom. "In a year we'll have four or five times as many households available," he says. "Five years from now we could probably do this entire promotion with the money we could take from pay-per-view in homes."
The Leonard-Hearns bout will cost the home viewer $15, with the local TV systems usually paying Main Event a guarantee as well as a percentage of their take. In the future, says Duva, the more sets equipped with pay-per-view technology the lower the cost per viewer will be. "Say we have 10 million sets in five years," he says. "We could charge as little as $8 each and still gross $80 million!"
It takes no talent for addition to extrapolate from these figures a wildly optimistic view of the megabuck possibilities for pay-per-view on a national scale. Think of it. At $15 a head, the Super Bowl draws $1.5 billion. A seven-game World Series, $2.1 billion. The Kentucky Derby, $496 million. It's like trying to visualize infinity.
But in truth, it probably isn't limitless. "Pay-per-view is way overrated," says Herb Granath, vice-president of ABC's Video Enterprises. "Sure, the Duran-Leonard fight got $15 per home, but that's about the only event I can think of that could draw that kind of money. People call it the wave of the future. I doubt it. I'm hard put to think of any event that would bring in millions of people willing to pay $15 to see it."
Of course, Granath is a network man, and his vested interest lies in the hope that pay TV can't produce that kind of bonanza. Yet dyed-in-the-wool network disciples aren't the only ones who believe that huge pay-per-view payoffs are a very iffy proposition. Indeed, one who agrees basically with Granath is Andrew Wald, senior vice-president (programming) of—yes—ON TV. "We spent a lot of time looking at the concept of pay-per-view and found that very few events qualify for the rate of distribution the Leonard-Duran fight did," says Wald. "Some people think you could ask the consumer to pay for a weekly professional football game. I don't believe that. The networks are surely going to remain the major outlet of the NFL for quite a while. And if one football game were carved out per se for pay TV on a weeknight, it simply won't have any value, since viewers can see so many others."
Jerry Levin, group vice-president of TIME INC.'S video division and the first programming chief of HBO, is also dubious. "You just aren't going to generate $10 million every time you turn on the lights," says Levin. "Sport needs more marketing than that. You need a broad base of subscribers to support sport on a day-in, day-out, week-in, week-out basis. And it takes a lot of extra work to create the mood that makes a viewer react positively toward putting up $10 or $15 to watch something in his home."