Cable TV faces the next frontier New technology promises both triumph and turmoil

January 17, 1993|By Ian Johnson | Ian Johnson,New York Bureau

NEW YORK — New York--If Carl and Debbie Perrone's viewing habits are any indication, television executives had better watch out.

The Perrones and their three children participate in a Time Warner Inc. pilot project that offers 150 channels to families in New York City's borough of Queens. Mr. Perrone likes to watch a channel featuring Chinese programming -- even though he doesn't understand the language. And the whole family gathers for recently released movies, which cost $3.95.

"For a family of five, it's much cheaper than going to the movies," said Mrs. Perrone, who pays $23.95 monthly for a service that includes as many as eight starting times for each of 15 movies. "It pays in the long run."

The Perrones' new habits point to an emerging television battleground. After years of stunning growth, cable television is being transformed by new technologies that could trigger its final victory over broadcast rivals -- or bury it under an avalanche of new channels.

Even as cable executives ponder the technologies' impact, their industry faces a slowdown. There are fewer and fewer homes to hook up these days. And new regulations have provoked fierce competition for open channels among fledgling networks.

"The cable networks are threatened in the same way that they threatened the old networks," said Les Brown, a senior fellow at Columbia University's Freedom Forum Media Study Center.

Besides the system being tested on the Perrones and 5,000 other New Yorkers, cable companies are introducing technology that will allow them to offer hundreds more channels. Meanwhile, Bell Atlantic Corp. and other phone companies are testing equipment that would allow viewers to bypass broadcast or cable networks for a virtually unlimited supply of shows, movies, sports events and shopping services.

But just as forecasters had no idea how cable television would develop -- many studies in the 1970s concluded that few viewers wanted more than three or four channels -- researchers can't assess the prospect for nearly unlimited viewer choice. No one ++ seems sure what viewers like the Perrones will watch -- or which companies will survive.

At first glance, Time Warner's system seems to be just an extension of cable's string of successes. Improved programming and viewer weariness with the big networks' lineup of sitcoms and movies -- boosted the number of subscribers from 17.7 million in 1980 to 57 million today. That's about 61 percent of the homes with televisions.

Meanwhile, increases in ad revenues and monthly subscription rates helped total cable revenues jump from $2.55 billion in 1980 to $21.5 billion in 1992, according to Kagan World Media Inc.

Cable networks also have managed to remain bare-boned operations compared to their broadcast counterparts. USA Networks, for example, is based in a modest set of offices in midtown Manhattan.

But this formula of rising revenues, clever programming and lean operations may be in jeopardy. Advertising remains a promising source of future income. Most analysts, however, believe little growth is available in hooking up homes.

More significant: new federal regulations that limit fee increases for cable operators. They have made operators hesitant to pick up the new cable networks. Because the operators must pay to carry these networks, they don't want to be saddled with higher expenses if they can't compensate by raising rates, says Michael L. Pandzik, president of the National Cable Television Cooperative Inc.

USA Networks' Sci-Fi Channel, for example, is available to only ,, 10 million viewers, although it has spent more than $75 million to buy movies such as the "Star Wars" trilogy and cult classics such as "Star Trek." It's far too early to judge the Sci-Fi Channel's success; many more viewers are expected to have access to it this year as systems like the Perrones' are expanded.

But its difficulties don't bode well for other fledgling networks -- especially those that seem to have little more substance than a night of brainstorming to find an offbeat niche. More than a dozen niche-oriented networks are being developed -- among those due out this year are the Military Channel, Romance Classics and the Game Show Channel.

"People expect a lot more out of cable programming than they did when many networks got started. Back then you could make mistakes. Now you can't," USA Networks President Kay Koplovitz said.

As Time Warner's pilot program in New York illustrates, the added channels give viewers much greater control over their entertainment. For example, if Mrs. Perrone is watching a movie and is distracted by a phone call, she can pick up where she left off on another channel.

Even this, however, is modest stuff compared to the next generation of cable, which will be available in some West Coast communities next year.

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