Pay-per-view (PPV) and video-on-demand (VOD) are two additional forms of pay cable that require cable television customers to pay for individual programs rather than a program package. PPV customers order movies, sports, or other event programs from their cable system and view the programming at a time determined either by the system operator or the event scheduler. VOD customers, via a more sophisticated digital delivery technology than is required for PPV, are able to order recorded programming for viewing at a time determined by the customers themselves. The cable customer’s monthly bill reflects the total cost of each PPV and/or VOD program or event viewed during the preceding month.

Subscription video-on-demand (SVOD) is yet another kind of pay-cable service that several cable systems were providing customers by late 2001. SVOD could best be described as a hybrid of pay cable and VOD whereby a cable customer pays a monthly fee (about $10 in 2001 figures) to access selections from the SVOD program library for viewing at a time convenient to the customer. The same digital delivery technology required for VOD also is required for SVOD.

Since pay-cable services are supported by subscriber fees, they carry no commercials. Pay-cable programmers usually schedule programs that are unique and that may never be seen on basic cable or broadcast television. These include sports events; musical concerts; first-run, uncut movies; and program series produced by or for a particular pay-cable service. Some movies carried on pay cable are especially produced by the pay-cable service; others were released originally for theatrical viewing prior to their availability for a pay-cable audience.

Some 48 million U.S. households (accounting for nearly 72 percent of all cable television households in the United States) subscribed to a pay-cable service by early 2001. Pay-cable subscribers typically pay about $10 per month (in 2001 figures) above their basic cable service charge. Any cost figure above or below the average depends on the total number of pay-cable services in the subscriber’s package and the package discount allowed by the subscriber’s cable system operator. The operator keeps approximately 50 percent of the fees collected from pay-cable subscribers. The other 50 percent goes to the company or companies originating the pay-cable service.

Pay cable predates the cable industry by several years. The first known pay television or subscription television (STV) service in the United States was a short-lived experimental effort by Zenith Radio Corporation in 1951 called Phonevision. During its 90-day life span, Phonevision offered daily movies carried by a special telephone line to some 300 Chicago households. Two other experimental STV services, one in New York City and one in Los Angeles, followed the Phonevision lead in 1951 but met with a similar fate.

The Federal Communications Commission (FCC) enacted rules in 1957 that severely limited STV program acquisition. The rules prevented STV from “siphoning” movies and special events such as sports from “free” television to pay television. In 1969 FCC rules were revised to limit any STV service to a single channel, available only in communities already served by at least five commercial television stations. Such restrictions for STV and, by then, pay cable were eliminated by a 1977 U.S. Court of Appeals decision that declared that the FCC’s pay television rules infringed on the cable television industry’s First Amendment rights.

The court of appeals decision was especially important to the Home Box Office (HBO) pay-cable service. The idea behind HBO was conceived by Charles F. Dolan. Financial assistance from Time-Life Cable to launch HBO was followed by agreements with Madison Square Garden and Universal Pictures allowing HBO to carry live sports events and recent movies. HBO was launched on November 8, 1972, providing pay-cable programming (a professional hockey game and a movie) to 365 Service Electric Cable subscribers in Wilkes-Barre, Pennsylvania. In less than one year, HBO’s service was carried by 14 cable television systems to more than 8,000 cable customers.

New ground was broken in pay-cable distribution in 1975, when HBO first carried its service via satellite to UA Columbia Cablevision subscribers in Fort Pierce and Vero Beach, Florida, and to American Television and Communications Corporation subscribers in Jackson, Mississippi. The first satellite distributed (via RCA’s Satcom) pay-cable programming was the Muhammad Ali–Joe Frazier championship boxing match from Manila. A nationally distributed pay-cable network was in the making but would not be a reality until HBO managed to convince prospective cable system affiliates to spend nearly $100,000 to purchase the necessary satellite receiving dish and accompanying hardware.

By 2001, 30 companies had launched national pay- cable services in the United States. HBO remained the largest, with 33 million subscribers receiving the service from more than 9,300 cable systems. In 2001 other leading national pay-cable services (with subscribership numbers that exceeded 1 million) were Cinemax, Showtime, the Movie Channel, Encore, Starz, and the Sundance Channel. One regional pay- cable service, The New England Sports Network, was carried by 169 cable systems and reached some 1.5 million subscribers in 2001. Several national pay-cable services also had subdivided themselves by 2001 in order to serve a more specific group of viewers. For example, HBO provided programming via the HBO Family and HBO Latino channels

Since their inception pay-cable services have struggled to satisfy subscribers, who frequently choose to disconnect from pay cable after a brief sampling period. According to surveys of subscribers, such “churn” occurs because low-quality movies are repeated too often, making pay cable a poor entertainment value.

The pay-cable industry is at a disadvantage in combating this criticism because of the preference (based on financial considerations) that the movie industry has for pay cable’s chief rival—home video. Production companies whose movies score particularly well at the box office generally follow the movies’ theatrical run by release to the home video market. The movies are then available for rental or purchase on videocassettes and DVDs and sometimes may be released to air on PPV cable services several weeks or months before they appear on pay cable. Pay-cable services that are best able to compete with home video in coming years may be those that have the financial resources to produce their own movies and original series.

Pay cable has therefore focused greater attention in recent years on airing original programming. HBO, in particular, has achieved critical success with such program series as The Sopranos and Sex and the City. Several pay-cable services have turned to boxing as the most popular choice for their sports-minded viewers. Also, many pay-cable services have begun airing a heavier schedule of programs during late evening hours aimed primarily at adult viewers.