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PAY-PER-VIEW NETWORKS REFUTE VSDA PPV THEFT STUDY AS INVALID AND BASED ON POOR RESEARCH METHODOLOGY

 NEW YORK/DENVER, Nov. 9 /PRNewswire/ -- In a joint press announcement, Hugh Panero, president and chief executive officer of Request Television and Jim Heyworth, president and chief executive officer of Viewer's Choice, the two largest pay-per-view (PPV) networks, each reaching 11.5 million addressable cable households, refuted the Video Software Dealers Association (VSDA) PPV theft report. The networks challenged this report, which the VSDA is currently presenting to motion picture studios, as invalid and transparent propaganda based on faulty research methodology.
 The VSDA study, officially released at a press conference in Los Angeles on Nov. 9, claims that illegal theft of movies during the PPV distribution window will cost the movie studios $67 million annually. The study is being used to support the VSDA's efforts, and the efforts of its member video retailers, to move the PPV availability for movies from 30 days to 90 days after home video.
 The two networks cited the following flaws with the VSDA report:
 -- The study is not independent research but rather commissioned,
 prepared and interpreted by the VSDA, and thus extremely
 biased.
 -- The VSDA's conclusions regarding PPV movie theft are not
 substantiated by the data provided in the original research
 study done by Cambridge Associates.
 -- The VSDA report utilizes a telephone recall measurement survey
 to determine PPV theft, an ineffective research technique for
 this purpose.
 -- The VSDA report focuses on theft during the PPV distribution
 window but omits information about theft during the home video
 distribution window which the MPAA calls "the most prevalent
 form of piracy in the U.S."
 It is the conclusion of the two networks that the purpose of the VSDA study is not to determine PPV theft but rather to delay the movie window of PPV, which the VSDA perceives as a major competitor gaining momentum.
 Panero, commenting on the effect of the report, claimed, "The VSDA has simply commissioned a research firm to support their claim that pay- per-view theft is rampant in order to gain a more favorable window from the movie studios. Obviously, every distribution has some form of piracy. The video industry, which has consistently dispelled any notion that PPV has a negative effect on home video, is overemphasizing the issue while avoiding the home video theft problem to serve their purposes."
 Concerning the alleged findings of the VSDA research, Heyworth commented, "Virtually all the conclusions presented in the report are based on VSDA assumptions, not the actual survey data. The VSDA is irresponsibly making serious allegations and claiming they are based on bonafide research. It's merely a sales pitch to gain more of a competitive advantage over pay-per-view."
 The report by the VSDA has been reported to have contributed to Paramount Pictures' and Columbia Tri-Star's decision to delay the PPV availability for several upcoming titles (Indecent Proposal, Sliver, The Firm, Sleepless in Seattle, and The Last Action Hero), from 30 days to over 80 days. Commenting on this move, Panero stated, "While there may be some near term gain for these studios, we find it very short-sighted for this to be happening at a time when the cable industry is gearing up for major pay-per-view expansion."
 Heyworth added, "Traditionally, existing distribution media have always complained about the newest product outlets. The theaters complained about pay television, pay television complained about home video and now home video is complaining about pay-per-view. History has proven that the advent of new markets has only increased studio revenues. It would be detrimental to everyone involved if the studios stunted the growth of pay-per-view."
 The VSDA report concludes that the PPV window move to 90 days after home video will result in a 16 percent increase in videocassette gross. However, according to Panero, "these results are based on telephone calls to selected VSDA members. There is only a finite dollar amount the video industry will commit to inventory expense. To assume the video industry, which is experiencing flat to minimal growth based on Kagan estimates, will increase expenditures by $650 million is ridiculous. The fact is when you buy an 80 or 90 day PPV window for 'A' titles, it will be at the expense of other product."
 Viewer's Choice and Request Television have issued a summary analysis of the VSDA report which emphasizes their concern about any form of piracy but refutes the major claims made by the VSDA. This analysis points out some of the unsubstantiated assumptions and methodological flaws and raises several new points, indicating how small the PPV piracy issue is in relation to other more serious forms, such as in the home video market. The analysis cites an MPAA report which claims that the most prevalent form of piracy in the United States is "back-to-back" copying of videocassettes. The MPAA also estimates that video piracy costs the motion picture industry approximately $2 billion worldwide annually while signal theft accounts for only one tenth of this amount.
 SUMMARY ANALYSIS OF THE VSDA PAY-PER-VIEW THEFT REPORT
 The VSDA study is not independent research but rather commissioned, prepared and interpreted by the VSDA, and thus extremely biased.
 Commissioned by the VSDA, this report set out to support their claim
 that PPV theft is a problem, and thus force the movie studios to
 give the video industry better distribution windows. Unfounded
 assumptions and inaccurate extrapolations were further used to
 support the argument. The report pieces together the results of
 several flawed surveys building a research "house of cards."
 The VSDA's conclusions regarding PPV movie theft are not substantiated by the data provided in the original research study done by Cambridge Associates.
 The VSDA study asked 1,000 respondents who ordered PPV in the last
 six months (out of 18,000 polled) the following question: "How much
 did you pay for your cable descrambler?" Based on this one
 question, and the assumption that half of those responding "don't
 know" or "don't remember" were lying and that only one third of
 those indicating a price were incorrect, the report assumes that
 approximately one out of every three (35 percent) respondents have
 an illegal PPV descrambler.
 The VSDA study utilized a telephone recall measurement survey to determine PPV theft, an ineffective research technique for this purpose.
 Experienced researchers in this area confirm that the accepted
 methodology to measure theft is unannounced in-home audits, which
 would yield an accurate assessment of the extent of market
 penetration of illegal converters.
 The VSDA survey asked the single question: "Where did you see any
 of the following movies?" The movies included "Sister Act," "Lethal
 Weapon 3," "Honey I Blew Up The Kids," "Death Becomes Her" and
 "Boomerang." The choices offered were PPV, home video, theater, and
 other. No distinction is made in the VSDA survey between PPV and
 hotel PPV. Using the results of this question and estimates as to
 the actual PPV buy rates, the report claims that by extrapolating
 their findings for "Lethal Weapon 3" for example, more customers
 said they watched the film on PPV than the VSDA estimates had paid
 for the movie, erroneously implying that the difference must have
 watched the movie illegally. Furthermore, the VSDA study asked
 viewers to recall all of this information three to four months after
 the fact.
 The report focuses on theft during the PPV distribution window but omits any information about theft during the home video distribution window.
 Piracy is a challenge in every distribution window. However, the
 Motion Picture Association of America (MPAA) claims that "the most
 prevalent form of piracy in the U.S. is the 'back to back' copying
 of videocassettes. In this case, video retailers simply purchase
 one or two genuine cassettes from the authorized distributor and
 then make duplicate copies by hooking up one VCR to another." The
 MPAA further claims that approximately 2,500 to 3,000 video retail
 outlets in the United States deal in pirated videocassettes, costing
 the motion picture companies in excess of $200 million annually.
 The MPAA also estimates that video piracy costs the motion picture
 industry approximately $2 billion worldwide annually.
 In 1992, the MPAA seized 204,580 pirated videocassettes totaling
 $12,274,800. In the first three quarters of 1993, the MPAA seized
 208,147 videocassettes totaling $12,488,820.
 Dual Deck VCRs that let you record virtually any home video movie
 rental now retail for only $900 and the percentage of homes with two
 VCRs is one of the fastest growing categories. In addition, various
 video copy protection techniques have proven to be defeatable.
 The report inaccurately claims that PPV theft will increase with the expansion of PPV channels.
 It is a fact that with the advent of digital technology, which will
 enable an explosion in the number of PPV channels offered, theft
 will be virtually eliminated. In fact, in Queens, N.Y., where the
 Quantum 40-channel test using analog technology is underway,
 Blockbuster Video executives have repeatedly said the expanded PPV
 service has had no impact on their business.
 It is our conviction that the purpose of the report is not an analysis of PPV theft but rather an attempt to slow the growth of PPV, which the VSDA perceives as a major competitor gaining momentum. In conclusion, the major motion picture studios have an economic interest in nurturing the development of the PPV window particularly as the home video industry matures and growth levels out. The VSDA study is an effort to thwart that development and must be seen for what it is -- partisan propaganda.
 -0- 11/9/93
 /CONTACT: Melissa Montuori of Viewer's Choice, 212-486-6600; or Jeff Bernstein of Request Television, 303-267-6160/


CO: Request Television; Viewer's Choice ST: Colorado, New York IN: ENT SU:

MC-BB -- DV010 -- 2346 11/09/93 14:38 EST
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Date:Nov 9, 1993
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