In recent years, there has been a proliferation of high-definition content in the basic and premium cable space. But the pay-per-view event industry has been slow to fully embrace the technology.
High production costs and the inability to recoup those expenses in the form of additional retail fees have KO'd most event distributors from moving toward offering video-enhanced versions of their respective shows.
But now some event distributors are beginning to test the technology in an effort to better serve both viewers and operators. Showtime Event Television and Home Box Office Pay-Per-View have offered boxing events in HD, and industry executives feel that it's only a matter of time before a majority of PPV events are presented in the advanced format.
INVESTMENT DISINCENTIVE
Unlike their network counterparts, which have advertising and/or affiliate-fee revenue streams to help offset HD production, PPV event distributors said it's difficult to justify the additional 30% to 40% increase in production and satellite distribution costs for transactional content that doesn't provide guaranteed revenue.
And, with only an estimated 13 million households currently owning HD-ready equipment — only one-third of which actually watch HD programming, according to Leichtman Research Group — event distributors say they can't charge an additional fee for such programming.
“Right now the market won't bear it,” said one PPV event distributor who wished to remain anonymous.
As a result, few PPV events have been proffered in HD: In 2004 only two major PPV events — Showtime's July Mike Tyson-Danny Williams fight and Home Box Office's December Vitali Klitschko-Williams bout — were delivered by In Demand LLC in that format.
Even World Wrestling Entertainment, which has always been on the cutting edge of PPV-event innovations, has yet to offer any of its monthly cards in HD.
“Right now, there's really no upside for us,” said WWE senior vice president of television operations Mike Grossman. “No one is willing to pay for the [additional] production costs. We certainly plan to get to HD, but we're doing it gradually.”
In Demand director of event programming Marshall Zelaznick said he understands the event distributor's financial dilemma, but also believes that HD content could be a major driver for the PPV event category. He believes that if event providers offer more video-enhanced product, it could drive buys from HD-hungry subscribers who are looking for quality product. Buy-rates for enhanced PPV boxing events in HD-enabled homes are two or three times higher than in the traditional analog space, he added.
Moreover, such programming — particularly marquee boxing events — could aid operators in selling digital cable and their respective HD programming tiers.
“I think HD has to appeal to both the consumer and the system, and boxing has made the most sense … There's a lot of cachet people care about,” Zelaznick said. “There's an appetite for HD programming and this is another way to get some of that programming in front of the consumer to let them enjoy the investment they've made in their HD equipment.”
Given the current state of affairs, it appears that the PPV category is stuck in the classic chicken-and-egg scenario: Do event providers roll out HD programming with the hope that it will eventually generate a revenue return? Or do they wait until the market reaches critical mass and costs come down before offering advanced-format events?
Where HBO is concerned, it's beginning to put more and more eggs in the HD basket. The company, which offers all of its World Championship Boxing and Boxing After Dark events in HD via the premium service, distributed its second HD PPV event with the July 16 Bernard Hopkins-Jermain Taylor bout.
And the provider expects to offer more HD events this year, according to HBO PPV general manager Tammy Ross.
“We're getting to a point as a company we have to decide whether we should continue to offer all our [boxing] playoff games to air in HD, but then offer the [PPV] Super Bowl in [standard-definition],” she said.
Showtime, which presents premium network-based boxing shows in HD, is also stepping up to the plate, having offered its June Tyson-Kevin McBride event that way.
OPENING OTHER WINDOWS
In Demand's Zelaznick said such efforts can only endear the PPV category to consumers and operators.
“For those that have it and experience it, these special events in HD are really unique and make it as close to being there as possible,” he said. “For us, we're looking to give systems a way to promote what they're trying to do in this space — helping to sell digital and HD.”
By producing events in HD, Zelaznick added, the distributors can begin to build a library of HD content that they could eventually exploit in premium delay windows or through their various SVOD services.
“It gives them the ability to exploit this program in a format that's superior and it adds cache to those other windows,” he said. “The perception is that's where all the networks are going, so if you can get your library in HD, that's where you want to be.”
