You're probably wondering what ever happened to pay-TV. Where is it? Why hasn't the bright promise materialized? For years, you've been conditioned to believe that "feevee", or "tollvision", or "pay-see", as it's called variously by its friends and enemies, will one day surcease - to hipper, more discerning minds - from the banality of much primetime TV programming: concerts instead of cowboys, ballet instead of bathos, opera instead of soap opera.
Well, so far it hasn't worked out that way, and a lot of experts are beginning to believe that it never will.
Recently, a market research outfit called Oxtoby-Smith completed a report - the most extensive ever attempted on pay-TV - which concluded that the whole idea of tollvision was a bad one in the first place, that pay-TV as a going business was wishful thinking at best and destined for doom by its very nature.
"I don't see any hope of any pay-TV system ever working", Dr. Joseph Smith, a partner in the firm, said.
The report's blanket dismissal of pay-TV's chances was a painful speck in the eye of such companies as RKO General and Zenith Radio Corporation, who are, respectively, the broadcaster and hardware supplier for the last remaining holdout of all the North American pay-TV experiments: a 5000-subscriber, over-the-air setup in Hartford, Conn., which is three years old and which recently had its franchise renewed by the FCC for a second three-year term.
John H. Pinto, vice president of the RKO General Phonevision Company, insisted to TV Guide that pay-TV is potentially a big money-maker, and that "if we gave the Hartford experiment the full push, we could put it in the black in three to four years. Most critics", said Pinto, "overlook the fact that pay-TV is commercially viable on a much smaller return than is regular TV. We don't need those vast audiences, since our return is proportionately higher".
Viable or not, the fact is that in the last year two of the three pay-TV experiments which have been operated in the U.S. and Canada have gone bust: In November, Subscription Television, Inc., in Los Angeles and San Francisco, a wired system masterminded by the redoubtable Sylvester L. (Pat) Weaver, was voted out of business in a California referendum, and subsequently filed under the Bankruptcy Act in an attempt to pay off its creditors. About $25,000,000 was reportedly spent in less than six months of operation. (The referendum later was judged unconstitutional by a California court, possibly opening the way for a revival of pay-TV there.).
Then, on April 30, a five-year-old pay-TV experiment in Etobicoke, a suburb of Toronto, closed down. Its sponsor, Paramount Pictures, had spent $3,000,000 to make it a success - but without good effect.
That left only the Hartford system, and nobody ever claimed that one was a success. RKO General and Zenith have put $10,000,000 into it, held the number of subscriber homes to 5000, but still admit that about 20,000 subscribers would be needed to break even.
Now Zenith has filed a petition before the FCC for rulemaking to authorize pay-TV on a nation-wide basis, and as an added service of already existing free TV outlets, especially UHF stations. Zenith, of course, is interested in selling its "unscrambling" devices, which are necessary to such systems, and the commercial broadcasters are interested - to state it baldly - in stopping them.
In this atmosphere of strife and uncertainty over tollvision's future, one of the major TV networks (whose orders were that it be anonymous) comissioned the Oxtoby-Smith firm to research the whole subject of pay-TV. Such auspices naturally compromise the findings, but Oxtoby-Smith insists they had a completely free hand.
In the fall of 1963, Oxtoby-Smith began sending researchers into the three pay-TV "pockets": Los Angeles-San Francisco, Etobicoke, and Hartford. Joseph Smith, the energetic, Phi Beta Kappa partner of Oxtoby-Smith who directed the survey, says: "We kept coming up with the same kind of data no matter what the area. That's why we feel secure about drawing generalizations".
The first major work was done in Hartford and fell into these categories: first, a series of "focused" interviews with small groups to help in designing a valid questionnaire; then 40 interviewers conducted 10,000 telephone interviews to gather demographic information and to explore the prevailing conceptions of most people toward pay-TV. Then came interviews in depth: They talked to 400 subscribers, 200 nonsubscribers and 120 former subscribers. Finally, the team made follow-up checks.
It was found that the average viewing time for all systems was 1.1 hours per week. The average expenditure was $65 per year. Oxtoby-Smith estimated that for any pay-TV system to qualify as a successful business, the subscribing households would have to spend a minimum, depending on the particular area, of $125 to $175 per year. None even approached the minimum.
But one of the starkest revelations of the study was the fact that, on pay-TV, "culture" is a washout. Scarcely anybody watches it. Drama, concerts and ballet consistently draw the flimsiest ratings. This, in spite of the fact that a vast percentage of pay-TV subscribers claimed to have signed up in the hope of escaping the "vast wasteland" of commercial TV.
In Los Angeles, for example, although educational programs accounted for one-third of the schedule and were among the cheapest offered, their ratings remained low. They yielded only 5 percent of the earned income. In Hartford, the average rating for a selected period for all specials (including such artistic Broadway successes as "Tchin-Tchin" and "Spoon River Anthology") was 7 percent of the potential audience, and for all educational programs, 1 percent.
"What does this show?" says Joseph Smith. "It Shows that the myth of viewer readiness for better things - a belief shared by many television critics and a few passionate FCC members - is just that: a myth. Culture doesn't do well on free TV. It does worse on pay-TV".
Then what will pay-TV subscribers plunk down their money to see? The answer was inescapable: movies and sports. In Hartford, the Hollywood version of "Irma La Douce" drew a whopping 50-percent rating, and so did a little-known but intriguingly titled flicker called "Who's Been Sleeping In My Bed?". "West Side Story" garnered an impressive 47 percent.
One of the most fascinating statistics is that 83 percent of the income in the moribund L.A.-San Francisco venture was derived from baseball and movies, in spite of Pat Weaver's insistent chorus that STV would be a happy haven for more discriminating minds.
These findings raise the inevitable question: What sorts of people subscribe to pay-TV? And why? The researchers discovered that: "Families earning $10,000 or more were at least twice as likely to subscribe as families earning less".
Similarly, they found out that subscribers are the sort who own the first electric toothbrush on the block, the first stereo hi-fi, the first Polaroid camera, the first color TV. They are, in short, an acquisitive bunch who habitually buy prestige and innovative items anyway, then don't have much time to use them.
Pay-TV subscribers are, according to the survey, big joiners: In Hartford, 51 percent belong to PTA versus 37 percent of nonsubscribers; twice as many subscribers join civic groups. They entertain heavily: About a quarter have guests in 10 times a month. They also go out more, as might be deduced from the number of organizations they belong to: 40 percent of the men have "nights out" at least 10 evenings a month - double the figure among nonsubscribers.
Joseph Smith sums it up this way: "The typical subscriber uses pay-TV as an 'occasional' entertainment. Unfortunately, the costs are such that occasional viewing of this sort is not enough to provide support for a profitable pay-TV system."
After listening to Smith's categorical pessimism about pay-TV's chances - and after slogging laboriously through the six volumes of his report - we were eager to hear a pay-TV partisan's side of the story, and thus sought out John Pinto, RKO General's custodian of the Hartford experiment.
"It looks like an excellent survey", Pinto said. "I have no argument at all with the facts, which seem very accurate. I take violent exception, however, to some of the interpretations".
Pinto's main complaint was over Oxtoby-Smith's suggestion that an annual average expenditure of $150 per subscribing family was necessary to keep a pay-TV system on an even keel. "That's preposterous", he said. "If we can get people to spend $100 per family, or an average of about $2 per week, we'd be doing fine. We'd actually be happy with a $1.25 weekly expenditure - or about $65 per year - from 10 percent of the TV homes in any market". (They have 5 percent in Hartford).
"I must emphasize that pay-TV doesn't need the vast audiences which commercial television needs to be profitable. Our return is proportionately so much higher per viewer. Our rule of thumb is to pay 35 percent of our income for programming, and from the other 65 percent we can make a good profit".
"We're losing money now and we're losing it heavily", Pinto said. "but we expect to expand the numbers drastically in Hartford, to double our subscription to 10,000. Even at that we won't be breaking even. It will take 15,000 to 20,000 homes for us to break even, but as we become less of a curiousity we expect to get that".
What about the quality of pay-TV in Hartford, and all the bright promise of yesteryear that it would provide fine entertainment for discerning minds weary of situation comedy? How does that jibe with the current 90 percent of the schedule devoted to movies and sports?
"We have offered a wide range of culture in the past", Pinto said, "but we've been disappointed that our customers haven't gone for it, in spite of the fact we've shown some superb things. But we never said we wouldn't rely on motion pictures as a staple. We're not in the business of changing the world. It is true that some subscribers have dropped out because of dissatisfaction with the programming".
How would he characterize, in plain terms, Hartford's chances of becoming a hot money-making operation? "We're not as bullish about it as Zenith, but we're confident and have high expectations".
Joseph S. Wright, president of Zenith Radio Corporation, told TV Guide: "The concrete factual data developed during the three-year over-the-air subscription-TV test in Hartford, Connecticut, are the result of actual day-to-day operating experience, not based on the limited information available through a survey, no matter how scientific. The Hartford results show that this new service has a broad level of public support".
"One of the most significant facts demonstrated by this test", Wright said, "is that the economy and convenience of subscription TV is of greatest importance to middle- and lower-income families who can at least afford the higher prices of entertainment. Of the 5000 Hartford subscribers, 40.8 percent have average annual incomes from $4000 to $7000; 43.3 percent from $7000 to $10,000; with only 14 percent over $10,000."
"In addition to the broad potential demand for subscription-TV service", Wright added, "the Hartford experience shows that with an average subscriber expenditure of about $100 per year, over-the-air subscription TV can be a sound business with only 20,000 subscribers. This means that subscription operation can be economically possible with only 10 percent of the top TV homes in any one of the top 100 TV markets in the country".
"These important facts, along with many others, form the basis for our recent petition to the FCC for a nation-wide authorization for subscription TV, so that the American public, in the free-enterprise marketplace, can decide for itself whether it wants this new TV service".
And so the arguments over pay-TV go. The heavy guns of commercial broadcasters and theater owners are arrayed against it, and a fifth column of indecision over its own goals is sabotaging it from within.
Can pay-TV resist these enemies? We'll have to wait and see.
Back to Chapter 2: RKO's Pay TV Experiment