A Cold Beer And A Checkbookby
Last spring, the Minnesota North Stars looked like a bunch of hockey pucks. They barely qualified for the Stanley Cup playoffs, and fan support had eroded to the point that local cable companies didn't even bid for rights to the Stars' playoff games. But a light bulb went off somewhere in the North Stars organization, and the team managed to string together eight local cable operators that charged customers $9.95 for each game they wanted to see. When the North Stars shocked the hockey world by advancing to the finals, the phones at this ad hoc pay-per-view network lit up like a Christmas tree. The $1.5 million the club collected helped defray a $7 million operating loss.
The North Stars' success with pay-per-view was as startling as their playoff march--and don't think executives in other sports didn't notice. Before very long, you too may be calling your cable company every time you want to see your favorite team in action. In return for a fee, the company will then program your cable box to decode a scrambled feed of the big game. It's even theoretically possible that you may someday have to shell out $50 or more to see a single World Series game, though the very thought has some in Washington steaming.
ROCKETING REVENUES. Up to now, pay-per-view has had only a fistful of blockbusters (table). The next may be just around the corner: the heavyweight championship match between challenger Mike Tyson and champion Evander Holyfield, scheduled for Nov. 8 in Las Vegas. The bout may be postponed or canceled if an Indianapolis grand jury indicts Tyson for rape. But if the fight goes forward, it could pull in $70 million in pay-per-view revenues alone, predicts Tom Adams, an analyst at media consultant Paul Kagan Associates.
Since 1987, says promoter Bob Arum, boxing's revenues from pay-per-view have rocketed upward, launched by the battle between Sugar Ray Leonard and Marvelous Marvin Hagler. Pay-per-view accounted for less than $10 million of that fight's $70 million in revenues. But back then, pay-per-view was available in only 10 million homes. That figure has since doubled and is growing by some 2 million homes annually. Even if only 8% of those homes pay $35 to $40 to see a fight, as they did for April's Holyfield-George Foreman bout, the growth potential is obvious. This year alone, pay-per-view special events--including boxing, wrestling, even the Sept. 23 opening of New York's Metropolitan Opera--will generate $295 million in revenues, says Kagan Associates.
In boxing at least, "pay-per-view has become the big kid on the block," says Arum. It's so big, he says, that pay-per-view executives have a say in who fights whom. After Tyson's controversial victory over Donovan "Razor" Ruddick on Mar. 18, Showtime, which has rights to Tyson's fights, pressed for a rematch. Says Scott Kurnit, president of Showtime Event TV: "The rematch was a natural for us."
The next frontier could be a major competition in a sport other than boxing. Showtime's Kurnit says he has talked to ABC about the Indianapolis 500. Time Warner Cable tried unsuccessfully to arrange the first match between sprinters Carl Lewis and Ben Johnson after Johnson's return from a 2 1/2-year suspension for steroid use. So far, at least, no dice. "There aren't enough sports events that would make people buy tickets both in Los Angeles and Duluth," says Pat Forciea, operations vice-president of the North Stars. Still, Forciea predicts that the National Hockey League, which doesn't have a national TV contract, may soon turn to some form of pay-per-view.
Pay-per-view is further off for sports with national TV deals. But it's coming. To recoup some of the $401 million it spent for the rights to the 1992 Barcelona Olympics, NBC plans to offer 600 hours of commercial-free Olympic events on local pay-per-view, arranged in packages costing $95 to $170. Showtime's Kurnit believes NBC will do well, though he thinks the network set its prices too high. "As a society, we'll pay a little more for the best seat in the house," he says. "Maybe the best seat is the one that doesn't come with commercials."
Maybe so, but this society also considers free sports on the tube as a right conferred at birth. When the North Stars went on pay-per-view last spring, Representative Gerry Sikorski (D-Minn.) cried foul. "It's not fair, it's not right, it's not the America we love," he fumed. Of like mind is Representative Peter H. Kostmayer (D-Pa.). Sikorski and Kostmayer are pushing different bills that would force sports leagues to broadcast a goodly number of free games or lose their current antitrust exemptions.
It's economics, not legislation, however, that so far is keeping pro sports on the sidelines. The National Football League won't put its showcase event, the Super Bowl, on pay-per-view anytime soon. But the league may experiment with pay-per-view in 1993--perhaps by giving San Francisco 49ers fans in Maine, say, a chance to pay to watch their team. With their own big-game network contracts, neither Major League Baseball nor the National Basketball Assn. is considering similar experiments.
SITTING PRETTY. Pay-per-view's biggest break would come only if the three major networks back away from big-bucks contracts to broadcast baseball and football. At that point, the solons of the NFL and Major League Baseball might resort to pay-per-view to fund escalating player salaries. "As long as a Jose Canseco can get $4 million a year, we're sitting pretty," says John Severino, president of Los Angeles-based cable channel Prime Ticket, which is considering pay-per-view telecasts for Lakers basketball and Kings hockey games next year.
How much longer can televised sports remain free? Pay-per-view advocates argue that the American consumer might pay a premium to skip the commercials. So far, that applies only to a few headline happenings. But as the Minnesota North Stars learned, pay-per-view can be a hot ticket even in the hinterlands.
PAY-PER-VIEW'S KNOCKOUT NUMBERS Top eight U.S. pay-per-view telecasts Event Date Telecast revenues * Millions of dollars EVANDER HOLYFIELD VS. GEORGE FOREMAN April, 1991 $55 MIKE TYSON VS. DONOVAN `RAZOR' RUDDICK June, 1991 40 JAMES `BUSTER' DOUGLAS VS. HOLYFIELD October, 1990 39 TYSON VS. RUDDICK March, 1991 33 SUGAR RAY LEONARD VS. ROBERTO DURAN December, 1989 24 WRESTLEMANIA VII March, 1991 23 TYSON VS. MICHAEL SPINKS June, 1988 21 WRESTLEMANIA VI April, 1990 20 *Not including sales to bars, restaurants, or closed-circuit venues DATA: PAUL KAGAN ASSOCIATES INC., SHOWTIME, TIME WARNER INC.