ON TV (TV network)

American subscription television service

ON TV was an American subscription television (STV) service that operated in eight markets between 1977 and 1985. Originally established by National Subscription Television, a joint venture of Oak Industries and Chartwell Communications, ON TV was part of a new breed of STV operations that broadcast premium programming—including movies, sporting events, and concerts—over an encrypted signal on a UHF television station and leased decoders to subscribing customers. At its peak in 1982, ON TV boasted more than 700,000 customers—more than half of them in Los Angeles, its most successful market. However, the rapidly expanding availability of cable television, coupled with a recession, caused the business to quickly lose subscribers at the same time that Oak Industries was experiencing severe financial difficulties. Between March 1983 and June 1985, all eight operations closed.

In 1973, Oak Industries, a maker of cable television equipment and other electronic components, and Chartwell Communications, a company majority owned by Jerry Perenchio and Norman Lear, founded a joint venture initially known as World Pay Television, Inc. to create and operate a subscription television system in the Los Angeles market. The connection was made when Everitt A. Carter, an executive at Oak Industries, attended a tennis match between Billie Jean King and Bobby Riggs in Houston, organized by Perenchio; Perenchio approached Carter and asked if the company could build a system to scramble over the air signals for pay distribution. While Oak was initially resistant to the idea, it ultimately agreed to develop the equipment if Perenchio fronted $200,000 for research and development, which he did. In 1976, Oak president Frank A. Astrologes was named chairman of the new venture, with Carter succeeding him at Oak. The company intended to open franchises in 14 different states, per Federal Communications Commission (FCC) filings at the time. The system, which would use scrambling of a standard UHF television station, required a carrier. That was secured by the venture in 1976 when, under the name of Oak Broadcasting Systems, Oak and Perenchio purchased Los Angeles television station KBSC TV (channel 52) for $1.2 million as part of the liquidation of its parent company, Kaiser Industries. After changing its name to National Subscription Television (NST), the service launched under the brand name ON TV on April 1, 1977, offering unedited, uninterrupted motion pictures, as well as limited slates of Los Angeles Dodgers, California Angels, Los Angeles Lakers and Los Angeles Kings games, during evening hours. The first 500 subscribers lived in the San Fernando Valley, as part of a soft launch of the new system. It was the second subscription television system in operation, with Wometco Home Theater having launched in New York City the previous month. Ambitions to expand ON TV beyond Los Angeles were immediate. When the first system went live, Carter claimed "firm contracts" to move forward in eight cities—five of which would eventually be home to ON TV branded subscription television operations—but stated he wanted to see if the Los Angeles system was a success first. In January 1978, Oak reached a deal with Sears to market ON TV service in the Los Angeles and Orange County area. The next year, ON TV got a competitor: SelecTV, which pioneered a pay per program model and only showed movies.

In October 1978, Oak and Chartwell, the partners in the Los Angeles system, reached an agreement to each develop six ON TV markets on their own; the Oak markets would be Chicago, Phoenix, Miami, Philadelphia, Minneapolis, and Dallas–Fort Worth, while Chartwell was tasked with development in New York, Detroit, Atlanta, San Francisco, Cleveland, and Houston. In Philadelphia, NST had reached a deal with Radio Broadcasting Corporation, which in 1977 was awarded a construction permit for a channel 57 TV station there. The next year, the company announced it would license its equipment and technology in cities where it did not intend to operate itself. The first of the Oak expansion cities firmed up considerably in November 1978 when Oak announced it would begin operating in Phoenix in July 1979 in a joint venture with the New Television Corporation, which held the construction permit for KNXV TV (channel 15); New Television would program the station during the day as a free independent, while ON TV would air in the evenings. Oak announced at that time that it would be on the air in Philadelphia and Miami by 1980. Meanwhile, the ON TV system in Los Angeles grew to more than 100,000 subscribers by the end of 1978 and 200,000 by August 1979, earning it the title of the world's largest single pay TV operation. Oak's increasing involvement with the entertainment business spurred the entire company, previously headquartered in Crystal Lake, Illinois, to move to southern California, where it built a new headquarters building in the planned community of Rancho Bernardo. As very large cities, like Philadelphia, saw years long delays in cable television wiring due to political disputes over franchises, the specter of services like ON TV loomed over the horizon and served as an impetus to consider more rapid action. Chartwell, too, began the task of developing markets. As early as 1977, NST had an agreement to run an STV service on WXON in Detroit, and the two parties aimed for a July 1, 1979, launch. In 1979, the company, through affiliate Tandem Productions, acquired New York City area station WNJU TV, and Tandem was waiting in the wings to buy Washington, D. C.'s WDCA TV if the FCC had rescinded its approval of that station's sale to Taft Broadcasting. Chartwell also explored buying a station in Sacramento, California, in 1980, going so far as to enter into advanced negotiations to purchase that city's KMUV TV. As 1979 continued, activity accelerated. Oak announced its intention to open subscription television in Miami at the end of the year from Fort Lauderdale based WKID TV, which it had purchased. In Chicago, it reached an agreement with Video 44, owner of UHF station WSNS TV, to use Oak equipment and technology in its service. (While Video 44 then attempted to sell 50 percent of the company to American Television and Communications, a subsidiary of Time, Inc. and owner of the Preview STV services which had a deal with Zenith to produce its equipment, the company pulled out of the deal in October when major movie studios protested the potential for a monopoly on pay TV programming between Time's STV holdings and Home Box Office cable network.) The Dallas–Fort Worth market entered the picture when Oak reaffirmed a 1976 deal with Channel 21, Inc., the Sidney Shlenker and Milton Grant–led consortium that held the construction permit for Fort Worth television station KTXA, to bring ON TV to the Metroplex. Oak also filed for construction permits in various cities around the United States, including channel 38 in St. Petersburg, Florida; channel 38 in New Orleans; and channel 20 in Denver. Those applications were joined by a 1981 filing for channel 16 at Everett, Washington, near Seattle. The Phoenix operation began September 9 when KNXV TV began broadcasting, and WKID TV in the Miami–Fort Lauderdale market commenced subscription television broadcasts on January 11, 1980. The first licensed ON TV system, owned by Home Entertainment Network—a division of Buford Television—went live on that company's WBTI TV in Cincinnati on February 1; the station itself took to the air on January 28. Oak went on air with ON TV in Chicago on September 22, after having bought a 49 percent stake in the licensee of WSNS, and in Dallas–Fort Worth on February 28, 1981. Just eight months after going live in Chicago, ON TV was profitable in that market—said to be unprecedented in the STV industry—and by October 1981, it was joined by all of the Oak owned operations except Dallas–Fort Worth. Still more stations appeared to be in the pipeline: Oak had a deal with Baltimore's WBFF to enter that market, and it owned 45 percent of an STV franchise for channel 29 at Minneapolis. Meanwhile, Chartwell—after having attempted to nab rights to New York Yankees baseball—dropped its New York subscription television plans, opting not to scrap WNJU TV's successful Spanish language programming and battle the market's dominant STV provider, Wometco Home Theater. (Perenchio would ultimately sell WNJU TV in 1986.)

In Los Angeles—the largest ON TV market, where Oak and Chartwell remained partners—the arrangement came into doubt in March 1981. The two sides disagreed over Perenchio's appointment of William M. Siegel, the chief executive of Chartwell, as the general manager of National Subscription Television—Los Angeles. Oak refused to consent to the appointment and claimed that Chartwell and Perenchio had "surreptitiously" placed Siegel on the payroll; it was reported that Oak had no dispute with Siegel but wanted to affirm its authority as 51 percent owner of the venture. Oak chairman Carter was surprised to learn that Siegel made more money than he did. Further, Perenchio drew Oak's ire when the Chartwell ON TV operation in Detroit ordered new decoder boxes from one of Oak's competitors. Oak and Chartwell settled in September; the suit was dropped, and Oak bought out Chartwell's 49 percent share of National Subscription Television for $55 million. Oak now controlled the entire Los Angeles and Miami systems, as well as majority shares in the Chicago, Dallas–Fort Worth and Phoenix markets, while Chartwell continued to own and operate the Detroit ON TV system. Cincinnati was licensed, to be joined by another licensing agreement Oak made starting January 31, 1982, with Willamette Subscription Television, the STV franchisee for KECH in the Portland, Oregon, market. By May 1982, ON TV in southern California had 400,000 subscribers. Oak boasted some 600,000 subscribers in its five ON TV markets, not counting Detroit, Cincinnati, or Portland. Additionally, Oak planned to start a ninth system in Houston in 1983, broadcasting over KTXH (channel 20), the under construction sister station to KTXA. However, by November, as KTXH itself neared air, it had become clear that Oak was not pursuing Houston plans, having essentially shuttered its part of the operation; Houston Chronicle television editor Ann Hodges cited the increasing wiring of the city for cable, the increased carriage of KTXH by cable systems without STV operation, and more expansive sports coverage planned in Houston than in Dallas–Fort Worth.

As Oak Industries faced wider financial trouble, it sought to reduce its involvement in the operation of its three remaining directly owned ON TV systems. In October 1983, operation of the Los Angeles, Chicago, and Miami–Fort Lauderdale systems shifted from Oak to a new company, Twin Arts Productions, led by former Playgirl magazine publisher Ira Ritter; the three services counted 370,000 total subscribers, down from 550,000 in October 1982. In early 1984, Oak announced a revamped ON TV program lineup, and its operations did score a victory when its direct competitor, Spectrum, opted to discontinue operating in Chicago and sell its subscriber base. However, Oak's condition continued to deteriorate. Later that month, the company announced it was being investigated by the Securities and Exchange Commission (SEC), and it posted a loss of $166.1 million for 1983. One of the company's auditors, Arthur Andersen, qualified its statement, fearing that Oak could not fully realize its $134 million investment in subscription television. As pressure increased on Oak's finances and the ON TV systems continued to lose subscribers during 1984, cuts were made. In mid July, National Subscription Television of Fort Lauderdale laid off 41 employees—half its staff. Less than two weeks later, Oak announced that it had sold WKID TV to John Blair & Co. for $17.75 million; the new buyers intended to program it as a Spanish language station. In August—after a year of speculation—it emerged that Oak was in talks to sell the Los Angeles system to SelecTV, which had competed alongside ON TV for six years in the Southern California market. A deal was initially reached, then collapsed. That October, after a year, management of ON TV had been brought back in house after the Twin Arts arrangement was ended in order to cut costs; the company had also taken over its satellite distribution to some 140,000 subscribers after dissolving the Telstar joint venture. Oak chairman Everitt Carter, under a cloud of uncertainty, abruptly left the position in December 1984. SelecTV ultimately acquired the Los Angeles operation, by then with just 156,000 subscribers, in February 1985. That same month, Oak reached a deal to sell KBSC TV to an investor group, Estrella Communications, headed by Joe Wallach, in a $30 million transaction. That station formally relaunched as Spanish language KVEA in November. On June 1, 1985, WBTI—which had been sold and relaunched as WIII at the start of the year—dropped ON TV, with just 3,200 remaining subscribers, when Oak ceased providing programming by satellite. Oak had one last portion of its subscription television business to dismantle, in Chicago, where WSNS ceased broadcasting as a subscription station on June 30 and began broadcasting programming from the Spanish International Network the next day. However, WSNS's years as a subscription television station had left a legacy that impeded Oak's ability to sell its stake in channel 44 for years. In 1982, Monroe Communications Corporation filed a challenge to WSNS's license renewal and a competing application to establish a channel 44 TV station in Chicago, charging that, as an STV station between 1979 and 1982, WSNS failed to serve the public interest and severely cut back on public affairs programming. An FCC administrative law judge found against WSNS licensee Video 44 and in favor of Monroe in 1985. The FCC later granted the renewal, only for a federal appeals court to rule in Monroe's favor in April 1990. After the FCC officially denied the license renewal in September 1990, however, Chicago's Hispanic community and civic leaders rallied around WSNS. Video 44 and Monroe reached an $18 million settlement agreement in 1993, and Oak and fellow Video 44 partner Harriscope sold their stake in the station to Telemundo in 1995.

Subscribers were charged $40 to $50 installation and $19.95 to $22.50 per month, depending on the market, in the first three ON TV launches (Los Angeles, Phoenix, and Detroit). ON TV programming consisted of four basic components: movies, sporting events, special events such as concerts and boxing matches, and adult programming. Though there was variance between ON TV operations—particularly with regard to sports programming in each market—after 1983, when it established the Telstar joint venture, Oak was able to supply much of this programming directly to affiliates and home satellite dish owners. The ON TV decoder supported additional program tiers and pay per view events on top of the normal service, for which subscribers would have to pay additional money. This functionality was used to broadcast pay per view events including boxing matches—consistently the most successful PPV offering—as well as an "adults only" service of late night movies. Among the notable pay per view presentations provided by ON TV (and other STV systems) was the first television screening of Star Wars in 1982, for which subscribers paid an additional $7.95. However, the system could not provide alternate fare for subscribers who did not pay for the movie, so those customers simply received no STV programming—just a blank screen. While more than 30 percent of customers in Oak's ON TV territory paid for Star Wars, conversion rates had surpassed 60 percent in some cases for boxing matches. Adult programming had high uptake in STV operations nationwide, and ON TV was no exception. In early 1983, 48 percent of subscribers across all ON TV systems paid an extra fee to subscribe to it. In Dallas–Fort Worth—despite being the last Oak market to offer the "Adults Only" tier—89 percent of subscribers opted in; it was 70 percent in Miami. Uptake ranged from 50 to 90 percent at other STV operations nationwide, including Wometco Home Theater and SelecTV Milwaukee.

With the notable exception of Chartwell's operation in Detroit, which used equipment from rival Blonder Tongue, ON TV systems, including all five owned by Oak itself, used scrambling technology and decoder hardware developed and manufactured by Oak, known as the "Model I". The boxes, connected to a standard UHF television antenna, decoded the encrypted STV signal for paying subscribers and output it to their sets. Each decoder was individually addressable, which meant they could be controlled centrally from the transmitter; addressability allowed for electronic connections and disconnections, as well as the ability to offer pay per view services, and allowed Oak to implement a theft deterrent where any disconnected decoder box stopped providing service after eight minutes. The decoders also supported an optional key module that served as a form of parental control. When ON TV entered into a partnership to start SportsVision, a second STV service, in Chicago, Oak manufactured special two channel decoders that supported both services. The last two new Oak STV installations—Dallas–Fort Worth and Portland—utilized a newer and more secure version of the Sigma scrambling system.

A problem that would be a constant for all subscription television operators was signal piracy. As early as late 1978, the Los Angeles Times described the Oak ON TV decoder as one that "reportedly can be built at home by handy TV technicians". In 1980, a trio of lawsuits against manufacturers of pirate decoders converged. Oak won a case in Phoenix, as did Chartwell in Detroit. In a case involving pirate decoders in Los Angeles, however, a Los Angeles federal judge ruled against Oak and ruled that ON TV did not hold a monopoly on decoding its signals. Two months later, California Governor Jerry Brown signed a new law prohibiting the sale of unauthorized STV decoding equipment. For Oak, piracy became a serious threat—and one not easily remediated, given the extensive install base of decoders and the inability to pinpoint where pirate decoders were located. Further, in Los Angeles, ON TV had begun turning on disconnected decoders regularly to restore service to subscribers affected by power failures in neighborhoods. Affecting all STV operations—but most severely impacting Chartwell in Detroit—was the cottage industry that sprang up in Windsor, Ontario, Canada, across the Detroit River. The Canadian Radio television and Telecommunications Commission's then ongoing study of pay television services prompted the company to halt any plans to start its own business operations there; when asked about the possibility of ON TV being legal in Canada, communications minister David MacDonald replied that the idea "would appear to fly in the face of every statement that's ever been made about Canadian broadcasting". It was legal, however, for Windsor residents to build decoders to receive ON TV—and some 10,000 existed within two years of beginning STV operation in Detroit—but when those decoders started to enter the United States and pose a challenge to Chartwell's operation, the company moved to take action. In late May 1981, the company stationed process servers outside of the Windsor offices of one decoder manufacturer, Video Gallery, to dissuade potential U. S. buyers. Chartwell then took Video Gallery and its American clients to U. S. federal court, seeking an injunction, and got it, preventing Americans from importing its products. In response, Video Gallery obtained an injunction in an Ontario court preventing ON TV representatives from interfering with customers entering its store. However, Chartwell would gain the upper hand. After winning its initial injunction, the government closed the border to Canadian decoders in August. Video Gallery closed at the end of the year, and Chartwell won a $618,000 judgment against it in March 1982. Even then, it was estimated that some 10,000 additional households received ON TV in southwestern Ontario, including on master antenna systems in apartment complexes—none of them making money for Chartwell. ON TV companies responded to piracy by modifying pulse signals and introducing new scrambling techniques. In Detroit, Chartwell began migrating to a new generation of decoder boxes. In 1984, ON TV Chicago, also afflicted by heavy pirating, offered "amnesty" to pirate users ahead of the launch of new scrambling equipment.

The first ON TV service launched in the Los Angeles market on April 1, 1977, on KBSC TV (channel 52), licensed to Corona; ON TV's offices were in Glendale. Channel 52 shuffled its ethnic programming lineup in favor of carrying ON TV during evening hours beginning at 8:00 pm. (KBSC TV changed its commercial program format to Spanish language shows in 1980.) By April 1979, the service was signing up 12,000 subscribers a month. By that year, it had grown its sports portfolio beyond the Dodgers, Angels, Lakers, and Kings to include USC Trojans college sports and Los Angeles Aztecs soccer, as well as horse racing from Santa Anita Park. After the FCC repealed a rule in late 1982 that required television stations offering a subscription service to broadcast at least 20 hours a week of unencrypted programming, KBSC began running ON TV 24 hours a day and displaced its existing Spanish language daytime programming. However, as Oak dismantled its former STV empire, it quickly sold the ON TV subscriber base, by then dwindling, and KBSC TV to separate parties weeks apart. SelecTV continued to broadcast over KBSC TV for several more months until the new, Spanish language KVEA was ready to debut.

In the only system Chartwell controlled outright, ON TV came to Detroit on July 1, 1979, broadcasting on WXON (channel 20); it had 15,000 subscribers within three months. The service quickly snared the rights to Detroit Red Wings hockey, Detroit Tigers baseball (consisting of 20 weeknight games a year from Tiger Stadium), and Michigan Wolverines athletics (including tape delayed football games). In the case of the Wolverines, it even ran one experimental 1979 telecast live, a presentation spearheaded by Michigan athletic director Don Canham with the blessing of the NCAA. WXON, however, proved to be a poor partner for ON TV. After airing the R rated movie Is There Sex After Death? (which contained considerable sex and nudity) on March 12, 1980, the station then ordered ON TV to screen all movies it aired for WXON executives. More critically, however, the station refused to cede any time before 8:00 p. m. and aired reruns in that time slot, severely crippling it as a sports broadcaster. Midweek Red Wings and Tigers games regularly began before ON TV was on the air, forcing the station to join games in progress (as with the Red Wings) or tape delay them (which it did for the Tigers). This flaw became highly visible when the Red Wings played the Calgary Flames on October 29, 1981; the Red Wings had scored five goals in the first period before ON TV picked up the game. WXON then sued ON TV to get out of what Chartwell claimed was a "fifty year contract" with the station. After the 1982 season, ON TV dropped its Tigers deal because it could not secure the air time it needed to telecast games in their entirety. In a bid to stem the piracy problem that had dogged it for nearly its entire existence, Chartwell began upgrading from its original Blonder Tongue units to a new generation of addressable decoders in 1982. It would not be enough. When ON TV closed in Detroit on March 31, 1983, Chartwell shuttered a business in which it had invested $13 million but never turned a profit. The system—which was vigorously competing against it, the subscription service on Ann Arbor based WIHT, and Livonia based MDS service MORE TV, in addition to rapidly proliferating cable services—had lost 26,000 of the 68,000 subscribers it claimed at its peak.

In Phoenix, ON TV launched on a new UHF television station, KNXV TV (channel 15), which signed on September 9, 1979, and immediately began carrying subscription television programming. The company immediately secured top tier sports: in Phoenix, ON TV held telecast rights at various times to ASU sports, the Phoenix Suns, Phoenix Giants minor league baseball, and Los Angeles Kings hockey. By July 1982, it had 39,000 subscribers in Phoenix, but signs of trouble were emerging. In 1981, the Suns signed a 13 year agreement to telecast games through American Cable (resulting in the launch of the Arizona Sports Programming Network), which sub licensed games to ON TV in part because they had not wired all of the metropolitan area. Late in 1982, KNXV resisted a request to expand ON TV to start before 7:00 p. m. on weekdays and 5:00 p. m. on weekends, while the station also wanted the subscription service to stop screening adult movies. Phoenix was one of the first markets to show serious subscriber erosion. By April 1983, its subscriber base had dipped below 25,000, a drop of more than 35 percent. Oak Communications ultimately shuttered ON TV in Phoenix on May 4, 1983, resulting in the loss of 140 jobs.

In 1979, Oak bought Fort Lauderdale television station WKID (channel 51) for $4.1 million, with the intention of using it to bring ON TV to south Florida. ON TV then began operating on January 11, 1980, broadcasting subscription programming from 7:00 p. m. to midnight on weekdays and 5:00 p. m. to midnight on weekends. Operating in a market with few professional sporting franchises, one of the immediate draws was a package of games of the Fort Lauderdale Strikers. 5,200 subscribers were signed up in the service's first two months, and it claimed 15,000 by July. In September 1981, ON TV added further hours, starting at 6:00 p. m. on weekdays. It expanded again in July 1982. By July 1984, when ON TV laid off half its staff, subscriptions had fallen from a 1982 high of 44,700 to 28,500, making it the smallest of Oak's STV operations at the time. At the time that John Blair & Co. acquired WKID TV, it was broadcasting from 4:00 p. m. to 2:00 a. m. and from 10:00 a. m. to 2:00 a. m. on weekends. Blair completed the acquisition in December. Channel 51 then went off the air as Blair prepared to implement the station's relaunch as WSCV, south Florida's second Spanish language television station.

ON TV on KTXA (channel 21) was a late entrant into the most competitive subscription television market in the nation. By the time ON TV signed on in the Dallas–Fort Worth Metroplex, the area had two competing STV services: VEU and Preview. In September 1982, VEU bought the Preview Dallas operation. VEU, aside from being the leader in subscribers, also had the two largest sports attractions in the market, airing Dallas Mavericks and Texas Rangers games; ON TV, by contrast, aired weekly Southwest Conference basketball during the season. An operation already struggling for position in a contested media market and with fewer broadcast hours than VEU was then kneecapped by KTXA's vigorous opposition to adult programming—objecting to expansion and blocking the showing of adult movies—which produced a frosty relationship between station and STV franchisee. The competitive market and contentious relationship contributed to the service discontinuing operations on April 30, 1983.

Like in Phoenix, ON TV began operations on a new station, KECH (channel 22), which began telecasting from Salem, Oregon, on November 21, 1981. Willamette Subscription Television, the local ON TV company which was commonly owned with the station by Arnold Brustin and Chris Desmond, rented evening airtime from KECH, but the operation never turned a profit. In its first year of operation, Willamette had lost $6.6 million, and by December 1982, the station was owed $300,000. The state of the operation was such that the limited partners in Willamette Subscription Television sued Brustin and Desmond for mismanagement in a case that was settled out of court. In 1982, Willamette acquired Premier Home Box Office, a microwave system delivering HBO to 10,000 subscribers, from Canadian company Rogers; Premier had more subscribers at the time than ON TV in the area, which had 6,000. After Brustin and Desmond were brought in on an interim basis to manage the subscription service on KTSF in San Francisco, which used SelecTV programming, the two opted to convert from ON TV to SelecTV programming. Willamette filed bankruptcy that summer, and a court ordered Desmond to create a debt repayment schedule for more than $4.7 million owed to 20 major creditors; meanwhile, the HBO microwave service battled signal piracy of its own. That November, KECH joined it in bankruptcy reorganization. On August 19, 1984, the ON TV service ended, with KECH programming older movies in prime time; the station at the time stated its plans to transmit adults only subscription television programming in late nights under the name "Cascade Entertainment Network" after that date.