The Tyson-Spinks title bout may have been a historic knockout in more ways than one. It may be remembered as the fight that KO'd free TV for any number of major sports events, from some NFL playoff games to the Indy 500. The expensive new age of pay-per-view (PPV) for sports is at least a few years away, but the lesson is clear: Potential PPV audiences and revenues for a must-see event are staggering.
Shelly Finkel, the promoter who organized both the closed-circuit (theaters, arenas and bars) and pay-per-view for Tyson-Spinks, says PPV accounted for $21 million of the fight's gross of about $67 million. Closed-circuit TV brought in some $27 million. Other income included $12.3 million from the live gate, $2 million from foreign TV sales, at least $1.25 million from Pepsi's exclusive sponsorship, $100,000 from miscellaneous sales such as T-shirts, and $3.1 million from the delayed-telecast rights.
When the money began to pour in, Finkel caught a glimpse of the future. The closed-circuit take was less than anticipated, but the startling PPV haul, which exceeded projections by about 20%, more than made up for it. Of the 46.2 million cable homes in the U.S., about five million are "addressable" for PPV, and Finkel struck deals with most of the cable systems that serve them. Despite an average cost of $35 to receive the fight, a surprising 12%, or 600,000 homes, anted up. A phenomenal 34% of Cablevision's Long Island subscribers paid to watch the bout.
Some cable entrepreneurs foresee a time in the late 1990s when the Super Bowl, which under its current contract with the networks is worth $17 million per year in TV rights, will move to PPV. "By 1990 there will be 20 million addressable homes," says Finkel. "A 25-percent penetration would give you five million homes. At $20 a ticket, half of it going to the NFL, that's $50 million. At 40 million addressable, same penetration, that's $100 million."
July 10, 1988
Just how soon PPV becomes a big force in sports TV depends on several factors. One is addressability. An addressable home is a cable-TV household that can be programmed by a computer at a cable system's headquarters to pick up PPV events. The viewer can receive a PPV telecast either by phoning in his request or by pushing a button on his cable converter box. The computer then "addresses" the PPV event to the set.
The first PPV systems of this sort were established in 1980; before then the number of addressable homes was too small for promoters to make money, partly because the cost to cable systems of converting to addressable equipment was prohibitive. "From now on, it's going to take off," predicts New York closed-circuit king Lou Falcigno of Momentum Enterprises. By the year 2000, 50% or more of cable homes might be addressable. But will leagues and sporting-event organizers, who depend on the exposure of free TV, switch to PPV? And what will the U.S. Congress say about all this?
Phil Hochberg, a sports communications lawyer in Washington, D.C., recalls that after the first Muhammad Ali-Joe Frazier fight was shown on closed circuit in 1971, 11 bills were submitted in Congress that would have prohibited such telecasts in the future and would have required promoters to accept the networks' best offer to telecast the event for free. The bills died because there weren't enough important fights and there were questions concerning the constitutionality of the legislation. When the fire storm comes this time—and it will come—the stakes will be higher.
Says Bill Daniels, one of the owners of Prime Ticket, a cable system in Southern California, "You'll see the day—10 years on the outside, seven years on the inside—when 90 percent of professional sports are on pay-per-view. The public will scream and holler, but gradually the people will accept it, just as they have basic cable."
The guess here is that Congress will give up its franking privileges before it allows the Super Bowl and the World Series to go to PPV. The leagues also will keep regular-season games and at least some playoff games on network TV for exposure. But myriad other premier events—key baseball, NFL and NBA playoff games, Indy, the Kentucky Derby, Wimbledon, parts of the Olympics—will move at least in part to PPV. And while the mismatch in Atlantic City may temporarily cool the public's desire to pay to watch fights, boxing will return to PPV as soon as someone comes along to truly challenge Tyson.
Get out your checkbook. By the year 2000, Mike Tyson may not be the only man in sports making $250,000 a second.