Playboy has taken another step toward becoming the dominant player in X-rated pornography on cable and satellite by purchasing three hard-core networks -- Hot Network, Hot Zone and Vivid TV -- for $70 million. The revenue potential of these networks is humongous. Since DirecTV started offering Hot Network and Hot Zone two years ago, for example, it has seen its profits rise from $100 million to a projected $275 million for 2001 on those two channels alone. Profits like that have caught the attention of Christie Hefner, CEO of Playboy Enterprises Inc., who had previously kept the Playboy Channel and its sister Spice Network away from X-rated content. She even called Playboy and Spice lifestyle channels rather than adult networks. Playboy said the three networks it just purchased reach 36 million cable and satellite households, compared to only 7 million in 1999. The network is studying pricing strategies: Instead of charging $6-$7 for a pay-per-view movie as it does with the current Spice, which heavily edits the X-rated movies, the real X-rated product could chalk up a retail price of as much as $11 per movie. That rate, coupled with a big increase in buy rates, could drive Playboy's profits dramatically and help it to negotiate better splits with cable operators, which now pocket 85%-90% of every Hot Network and Hot Zone PPV dollar. |
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