Washington-Capping a four-year litigation fight led by Playboy Entertainment Group Inc., the Supreme Court last week scuttled a federal law that effectively relegated adult cable networks to the overnight time slot to put them beyond the reach of children.
In a 5-4 decision that caused five justices to write separately, the high court affirmed a lower court's 1998 ruling that a channel-scrambling law had violated Playboy's First Amendment rights by keeping its programming off cable systems for 16 hours per day.
Playboy challenged section 505 of the Telecommunications Act of 1996, a provision crafted to prevent "signal bleed"-a scrambling glitch that allows adult content to be seen and heard in cable homes that do not subscribe to adult services.
Adult-PPV-network executives hailed the decision and expressed confidence that operators will soon begin to upgrade existing adult services to 24 hours from late-night "safe-harbor" hours outlined in the Act.
But while many operators said the decision is positive for the industry, most weren't sure if analog adult-PPV-service carriage would be greatly affected.
In an opinion written by Justice Anthony Kennedy, author of the court's 1997 cable must-carry decision, the court said Congress had other means less damaging to Playboy's free-speech rights to accomplish its goal of ensuring that children are not exposed to pornographic images and sounds on cable television.
The law required cable operators to accost signal bleed by fully blocking the audio and video of any channel "primarily dedicated to sexually oriented programming." Noncomplying cable systems were forced to air Playboy only during the safe-harbor hours of 10 p.m. through 6 a.m., as directed by the Federal Communications Commission.
"The First Amendment requires a more careful assessment and characterization of an evil in order to justify a regulation as sweeping as this," Kennedy wrote in a 25-page opinion.
The court found that cable operators, fearing fines if scrambling technology failed and signal bleed occurred, overwhelmingly chose the time-channeling option and, in doing so, inflicted financial pain on Playboy, as 30 percent to 50 percent of all adult programming had traditionally been viewed in the home prior to 10 p.m.
Indeed, Playboy Entertainment Group president Tony Lynn said the network lost around "$5 million to $10 million in profit" and the industry overall suffered a $30 million loss due to the law. He added that the company also spent millions of dollars on legal fees.
Vivid Entertainment Group president Bill Asher said the law has negatively affected analog-PPV distribution of the company's The Hot Network and The Hot Zone adult channels. "For years, section 505 was the barometer for where the industry was headed with regard to adult programming," he added.
Lynn said the path is now clear for operators to carry Playboy, sister service Spice and other adult-PPV networks on a 24-hour basis. Only about 30 percent of Playboy's 12 million addressable analog-cable households receive the service on a 24-hour basis.
New Frontier Media Inc. senior vice president of sales Ken Boenish also said that company's Pleasure and more explicit The Erotic Network would benefit from the decision. About 46 percent of the networks' analog PPV base are getting the services on a part-time basis.
"With nearly 40 percent of all adult-PPV buys occurring during daytime hours, we could see as much as a 20 percent increase in our business," Boenish said.
But while operators applauded the decision, very few said they would make any major changes to their adult-PPV lineups in the near future.
"The court decision has not caused us to re-evaluate our adult offerings," AT & T Broadband spokeswoman Tracy Hollingsworth said.
Time Warner Cable vice president of communications Michael Luftman said most of the MSO's systems met the technological scrambling requirements and, therefore, they didn't have to move to safe-harbor hours. "Nevertheless, it's always good when the Supreme Court reaffirms cable's First Amendment rights," he added.
Another MSO executive who wished to remain anonymous said the company would wait until digital comes along to offer full-time adult-PPV services. "We miss the revenue that we had with full-time carriage of Playboy [TV], but we'll be able to offer many more adult choices for consumers in digital that will easily generate more revenue than in analog," the executive said.
While Lynn admitted that digital is the future for Playboy, he does believe some operators will upgrade the network on analog. "During the four years that transpired, technology moved faster than the judicial systems and digital arrived, so we certainly expect 24-hour carriage in digital," he said. "It's good to have 505 finally behind us and the fast rollout of digital in front of us."
But not everyone applauded the decision. Sen. Diane Feinstein (D-Calif.), who co-sponsored section 505 with Sen. Trent Lott (R-Miss.), blasted the decision as "a blow against the ability of Congress to protect children from sexually explicit material."
Feinstein said the court's view that parents can police their kids' viewing habits and are cognizant of free per-channel blocking services "simple ignores the reality of parenting in the 21st century."
Various groups urged the court to uphold the law, including the Family Research Council, a nonprofit public-policy organization based here. "It's a sad day when the protection of children takes a back seat to the profit of pornographers," FRC senior director of legal studies Janet M. LaRue said.
Bruce Fein, a former FCC general counsel, said he disagreed with the ruling, adding that the government had a separate interest to protect children from pornography in a world where parents fail or refuse to monitor the TV-viewing habits of their children.
"The court seemed to have abandoned the idea that the government has a legitimate role in protecting the morals of youth independent of the adults' wishes," Fein said.
FCC chairman William Kennard issued a reminder to parents that the V-chip is a tool they can use to keep kids from watching adult content on cable. The V-chip is a channel-blocking technology legally required in many new TV sets.
"Parental choice is precisely the core of the V-chip program, which is giving parents the ability to block television programming that is not fit for their kids to watch," Kennard said in a prepared statement. "We continue to urge parents to equip themselves with a V-chip."
Kennard also pointed to section 504, the law that requires cable operators to provide per-channel blocking free-of-charge at the request of the subscriber-the same law Kennedy highlighted as an adequate alternative to time-channeling of adult networks.
Although the law had a compelling purpose in protecting youth from exposure to sex channels, Kennedy said, it was not the least restrictive approach.
He added that section 504 accomplished the same goal of keeping porn out of homes where it is unwanted without muzzling Playboy for two-thirds of the broadcast day in homes where the service is desired.
"Simply put, targeted blocking is less restrictive than banning, and the government cannot ban speech if targeted blocking is a feasible and effective means of furthering its compelling interests," Kennedy said.
In order to ensure the effectiveness of section 504, the lower court had ordered Playboy to include in its contracts with cable operators terms that said subscribers need to be notified of their rights to block any channel on the system.
Kennedy's opinion was joined by Justices John Paul Stevens, David Souter, Clarence Thomas and Ruth Bader Ginsburg. In dissent were Chief Justice William Rehnquist and Justices Sandra Day O'Connor, Antonin Scalia and Stephen Breyer.
