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PPV Grew in '02 But Not Enough

Cable and DBS operators continued to generate strong growth in their pay-per-view business last year, but revenues are still far short of impressing studios that they should grant operators more-favorable terms.

That's the conclusion of Showtime Event Television, which each year drafts a study of PPV sales. In 2002, SET found, total cable and DBS PPV revenues grew 19% to $2.4 billion. Hollywood movies accounted for the bulk of the retail sales—$1.5 billion, or 60%—and movie sales rose 19%. Pornography—both soft and increasingly explicit adult product— generated $609 million, or 25%; adult sales increased 15%.

Events, mostly boxing and wrestling, generated $363 million, or 27% of all PPV sales, and rose 15%. That's far better than in 2001, when event revenues dropped 30%.

The big kick comes from digital cable, which offers dozens of movies at a time, allowing subscribers to pick from a number of greater titles, and more-flexible start times. Analog systems typically offer three to six PPV channels.

SET President Mark Greenberg said he couldn't answer the big question: How's video-on-demand doing? About 4 million homes have VOD services, but cable operators have steadfastly refused to offer details on actual VOD sales, leading many on Wall Street to believe the business is not that impressive.

The study suggests that, for movie studios, PPV is still far less promising than DVD and VHS. DVD sales have driven the home-video business to $12 billion in retail sales, of which the studios get around $6 billion.

After more than 15 years, PPV generates just $600 million in splits to the studios.

That means studios will likely continue to ignore operators' pleas to get movies the same day Blockbuster and Wal-Mart do, instead of at the current PPV window, 30 to 60 days later.

Cable MSOs just don't market PPV aggressively enough, according to Greenberg. "Look at premium networks," he said, noting that Showtime, HBO and Starz generate far greater retail sales on cable even though they don't get movies for another year.

In event programming, the biggest draw was last June's fight between Lennox Lewis and Mike Tyson, which generated a record $106.9 million in sales. Second for 2002 was the Oscar de la Hoya-Fernando Vargas match, which logged $40 million. Rounding on the top 10 were various World Wrestling Entertainment events, which sold $12 million to $28 million each.