Pay TV: An Historic Cash Cow

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This historical piece offers some great insight into our current (and coming) television experience. Like any industry, some of these things have come to pass; others have wildly exceeded market expections. The smart investor will look to performance before making decisions about the current market. Read on, and plug in to the pay TV market.

Perhaps the most exciting things on entertainment horizons are pay and color TV. Despite the current controversy, pay TV or subscription TV, will undoubtedly become a primary entertainment medium because of its inherent flexibility and convenience.

It is expected to add another dimension to television which itself constitutes a new dimension in entertainment. Leading the field are Paramount Pictures and Zenith Radio.

Early in 1960, Paramount's International Telemeter division launched its first test in Etobicoke, Canada, to explore and develop subscription television systems using both wire and over-the-air techniques. As a result of its studies, International Telemeter chose to exploit the wire technique by which the signal is transmitted over coaxial cable and tapped off directly into the house where a metering and selection unit with coin input is attached to the antenna lead of the subscriber's set.

It will, of course, take much broader programming experiments by Paramount to check the economic feasibility of such a system and to test anticipated legislative roadblocks resulting from the announced opposition of such strong sources as national television networks and movie distributors who view emerging pay TV as a threat.

The same problems of economic feasibility and legislative roadblocks are facing the other pay TV system advocated by Zenith Radio Corporation. It is an over-the-air system of transmitting signals without the use of coaxial cable as in the case of Paramount's wire technique.

Early in January 1961, the Federal Communications Commission gave temporary approval to Zenith's Phonevision pay-TV system. The system is so called because Zenith has been associated in this project with Hartford Phone-vision Co., a subsidiary of RKO-General. Zenith will manufacture special attachments for regular TV receivers which would be leased to the public of the Hartford, Conn., testing area during the subscription TV experiments.

While it is impossible to estimate the percentage of the approximately 50 million TV homes that will eventually use pay TV or what system (over-the-air or wire), the market potential should indeed be startling, even assuming a comparatively low penetration, in view of the estimated $1.3 billion spent by Americans for motion picture admissions in 1959 alone.

"Even without balance sheets or earnings records," said Donald I. Rogers, business and financial editor of the New York Herald Tribune. "Pay TV has allure for hard-headed investors, primarily because the potential, viewed against the broad background of the television industry, literally staggers the imagination."

As for a comparison of the two potential rival systems, Mr. Rogers considered using the airways as far more economical.

"To wire entire streets or communities," said Mr. Rogers. "Could cost up to $150 a home and call for great capital investment. Maintenance costs on cabled systems are also high."

Both Zenith and International Telemeter are relying on what Mr. Rogers termed the "home box-office concept." Their picture is scrambled when transmitted and the subscriber uses a special decoder to get the picture. No such decoder would be needed in still another pay-TV system developed by Teleglobe; this one does not use scrambling. It withholds the sound reaching the subscriber via a Teleglobe speaker-amplifier attached to telephone-type wires.

Irrespective of which subscription-TV system eventually prevails, the reward for investing in the right medium company should be high. "If only half of the nation's viewers, or 25,000,000 homes," said Mr. Rogers. "Were to spend but $2 weekly for quality programs for the whole family, the annual gross would be in excess of $2,500,000,000—double that grossed last year by the entire industry from advertisers."

Wish you knew then what we know now? Looking back is a great way to help make investment decisions for the future. Fee-based entertainment continues to be a huge market to invest in. Take a new look at this historically active industry.

This article is a small snippet from www.stockmarketquoteresearch.com

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