PLAYBOY'S COMPLAINT THE CABLE BIZ
By HENRY GOLDBLATT

(FORTUNE Magazine) – Adult programmers like Playboy Entertainment are trying to thwart a section of last year's Telecommunications Act that requires cable operators to eliminate video and audio "bleed" from pay-per-view sex channels. Bleeds give unsuspecting channel surfers two or three seconds of flesh and groans before the screen goes quiet and squiggly. Cable operators whose systems can't nix such naughtiness may air adult networks only between 10 P.M. and 6 A.M. So, faced with costly upgrades for 80% of their households, operators have cut back.

Poor Playboy. Even though its two channels offer such soft-core fare as Farrah Fawcett cavorting naked in paint, the company has been reined in in markets like New York and Chicago. That's unfair, says Playboy CEO Christie Hefner: "Movie services [like Showtime] can do well with this kind of programming because the restrictions don't apply to them." Hefner says the restrictions could shave 20% off Playboy's estimated 1998 profits.

Playboy has been fighting the FCC since last March. A Delaware federal district court may soon rule on whether the restriction can be dismissed based on the recent Supreme Court ruling that loosened Congress' law governing decency on the Internet. Meanwhile, Playboy is helping DirecTV market its satellite dishes, which aren't similarly regulated. Other adult programmers, such as Spice Entertainment, which operates three channels in New York, deliver a few seconds of music when anyone clicks on its channels, drowning out stray moans. Spice's new pricing plan also encourages customers to tape programs for viewing whenever they choose. Cable operators encourage such moves--they get 65% of the sale on each pay-per-view order.

Technology will eventually render the issue irrelevant: The cable companies' new digital service, now rolling out in a handful of markets, stanches all bleeding.

--Henry Goldblatt