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Sex can sell again

Playboy ruling likely to give adult PPV second wind 5/28/2000 08:00:00 PM Eastern

The floodgates were not flung open by last week's Supreme Court ruling that said limiting sex channels to night hours is unconstitutional. But they will be soon, some say.

"We don't expect a significant spike in 24-hour carriage," said Brian Quirk, Playboy's executive vice president of affiliate sales and marketing for pay TV. Indeed, representatives for Time Warner, Cablevision, AT & T and Comcast said there were no immediate plans to reinstate Playboy to 24-hour status. However, industry insiders expect operators to quietly expand adult networks months from now when the press is focused elsewhere.

By a close 5-4 vote, the court found that the risk posed to children when adult-oriented audio and video bleeds through scrambled feeds is not enough to warrant restricting free speech to 10 p.m-6 a.m. The court said that because cable operators are required by law to voluntarily block any programming at a subscriber's request, the late-night ban is unnecessary.

Robert Corn-Revere, a First Amendment attorney who argued the case for Playboy, said the court's decision implies that speech broadcast to many people is more protected if the user has the option to filter out what he or she doesn't want to see. That applies to the Internet and the V-chip, he said.

For right now, the ruling should make marketing adult fare easier; it's already lucrative. "It's kind of like the red-headed stepchild of the industry," said a prominent cable consultant. "Nobody wants to talk about adult programming, but it's a huge market. This is a huge boon for Playboy no matter what operators say. I think this is going to jump-start subscribership."

Playboy lost 24-hour carriage in about 3 million of its 11.6 million homes back in early 1997, when the so-called "safe harbor" clause in the 1996 Telecom Act was enforced to prevent signal bleed of scrambled adult pay networks. At the time, a majority of cable operators cut Playboy and other adult networks back to the hours between 10 p.m. and 6 a.m. Playboy's buy rates dropped by about 33% as a result.

"Operators really complained about their revenues once this went to 10 p.m.," said one programming executive. That's because cable operators get up to 80% of the money generated by an adult buy, which can range from $8 to $16. That's opposed to the 50% they get for a typical movie costing around $3.95. "You have to sell three movies in order to make up for one porn sell," the programmer said.

Bill Asher, president of the Hot Networks, said he expected to see more growth in addressable analog homes six months to nine months down the road.

Asher's two channels, Hot Network and Hot Zone, are already on a roll, growing by about 1 million subscribers per month over the last year.

All adult networks will eventually give way to digital, so there's little to be gained from an aggressive distribution campaign, Asher and Quirk said. Many operators are already systematically migrating adult channels to digital tiers, where the possibility of signal bleed is nil and buy rates for adult more than double.

The government argued that the risk signal bleed poses to children gave it a compelling public interest to keep scrambled adult cable networks in a safe-harbor viewing time.

"If signal bleed is not a significant empirical problem," Justice Stephen Breyer asked in his dissent, "then why, in light of the cost of its cure, must so many cable operators switch to night-time hours?"

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