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Adult PPV Looks Hot in 2001

While many pay-per-view executives and observers will focus on driving near video-on-demand and VOD movie purchases in 2001, the adult business will arguably make its share of noise in PPV next year-albeit quietly.

Adult product has been a consistent source of revenue for cable operators since Playboy TV launched in the late 1980s. As operators expanded their PPV channels to offer more choice to consumers, the adult industry kept up with the technology by adding more networks and providing additional movies and special programming.

In the late 1990s, services such as Spice Hot, The Erotic Network and The Hot Network pushed the envelope on editing standards and offered a "hotter" product with greater consumer appeal than traditional adult PPV fare.

While the more explicit product isn't as widely distributed as traditional adult services like Playboy and Spice, such services can generate from 50 percent to 100 percent more revenue than cable-edited adult programming.

The combination of traditional and hot product helped the adult PPV category reach the $400 million mark for the first time ever in 2000, according to Showtime Event Television's 2000 PPV forecast report.

In fact, adult PPV revenues have more than tripled since 1995, according to SET-without the fanfare that accompanies PPV boxing or wrestling.

Aided by digital technology, the category's success came despite the intrusion of Section 505 of The Telecommunications Act of 1996. That law forced many operators that lacked effective signal-scrambling technology to carry adult programming only during "safe-harbor" hours, or between 10 p.m. and 6 a.m.

Now VOD is set to launch in a number of systems this year, and adult PPV providers are poised to utilize on-demand technology to generate revenues for operators. Both Vivid On Demand, which owns The Hot Network, and New Frontier Media Inc. are poised to reap the financial benefits of the industry's newest "killer app."

Even Playboy Enterprises Inc., which had been slow to move toward more explicit fare, will jump on the bandwagon in March with the launch of three services that offer the least edited adult programming available on cable.

Playboy's two Spice Platinum services and its Spice Platinum Live should provide even more adult programming choices to cable subscribers, who have proved they will pay for the racier movies and specials.

But the controversial services-and those operators that choose to carry them-will continue to face their share of hurdles to clear during the year.

While it's clear adult services can be very lucrative for operators, just how many subscribers will actually have access to the product remains unknown.

Every operator knows the revenue potential of adult PPV, but not all are willing to launch the services because of subscriber backlash in more conservative communities, even though digital cable offers greater signal security than its analog predecessor.

Even companies committed to offering adult PPV product are taking heat. Conservative shareholders continue to criticize AT&T Broadband for The Hot Network. In fact, those investors have asked parent AT&T Corp. to put the issue to a vote during the company's annual meeting next year, according to published reports.

But even the staunchest objectors of adult product seem willing to acquiesce to community wishes. Despite its ban on adult product, Adelphia Communications Corp. has said it would consider reinstating adult services in the Los Angeles area if local franchise authorities request such actions.

The adult PPV adult category may come into its own in 2001, even if nobody outside of the industry hears about it.