Pay-Cable vs. The Film Studios

During a time when “broadcast networks and film studios were not allowed to own one another, and broadcast networks were also prohibited from owning cable systems,” a field of opportunity and restrictions worked in and against certain players favors (Holt 22). From 1980 – 1983, “the DOJ pursued antitrust action against the film studios twice…for their attempts to establish pay-TV channels/services” which caused government suspicion over “competition and vertical integration” legitimacy (26). During this time where pay-cable and film markets were independent of one another, one player, HBO, was taking this opportunity to reap the benefits since they were being recognized as an “outsider” in the studio system trade (26).

In it’s first year as television’s first client for the SATCOM I satellite in 1975, HBO quickly  emerged as top dog of premium cable channels. Making use of this new method of distribution, it had “about 6 million subscribers, accounting for 69 percent of the pay-cable market at the time” by the end of 1980 (27). The only other competitors in this field then were Showtime and The Movie Channel which were carrying drastically lower numbers of subscribers than HBO yet were still growing steadily enough to cause upset for the studio system. In fact, “HBO had so much power over the studios from its unique position in the pay-TV market that it was able to negotiate extremely favorable contracts for Hollywood product and command ‘artificially low prices,’ as the studios saw it” (28). By 1981, they “had become the studios’ largest customer, licensing over $130 million of studio product that year alone” (28). HBO was reaching such astronomical levels of success because they had just begun investing in “pre-selling television rights” and were so strong doing so that they were beating out film studios from even entering the field. Their now heavy involvement in the financing of film had “upset the balance of power between the major film studios and the burgeoning pay-cable industry” (28). The film studios were not at all happy with the way these processes were unfolding and were desperate to gain the control and power they once held graciously back again that they sought out alternative plans to get into the pay-cable market, thus came the creation of Premiere.

Holt, Jennifer. Empires of Entertainment Media Industries and the Politics of Deregulation, 1980-1996. Piscataway: Rutgers UP, 2011. Print.

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