News

Turners Cash-Plus-Trade Lures Ad Sales

6/06/1999 8:00 PM Eastern

Turner Broadcasting System Inc.'s Turner Trade Group is
using a mixture of cash and trade deals with various companies to bring in new cable
advertisers, while also selling everything from merchandise to hotel stays to Turner
employees and, soon, to parent company Time Warner Inc. employees worldwide.

This low-profile operation currently counts about one-dozen
companies as its clients, according to vice president and general manager Marshall Orson.
These range from Air Canada, a client for five years, to relative newcomers like Bulova
Watch Co., Canadian Airlines International, Swissôtel and Yamaha Electronics Corp., he
said.

But don't use the word "barter" to describe what
TTG does. TBSI executives and Atlanta-based Orson bristle at the mention of the
"B" word, figuring that it has some negative connotations.

Even in syndication in the 1970s, barter was widely deemed
"a four-letter word," implying that bartered TV programming had lesser quality,
despite being used by major marketers like Colgate-Palmolive Co., according to industry
sources.

Eventually, TV distributors came up with "advertiser
syndication" as a replacement handle.

Indeed, Orson said, "The word 'barter' has been banned
from the lexicon here."

For one thing, he explained, TTG's deals encompass cash
plus goods. In a non-Turner barter deal, a TBSI spokesman said, a client swaps goods to a
media company in exchange for commercial time of equivalent value. That merchandise is
assigned to an outside barter firm, which could alienate the client's retail distributors
by "dumping" those products at bargain-basement prices.

TBSI avoids that negative situation by limiting the
discounted trade goods or services -- from video camcorders and wristwatches to hotel
stays -- to its own employees.

"We don't look at it as a last resort or a low-margin
business," Orson emphasized. Instead, TTG is "a mainline part of [our] ad-sales
business. It's not about buying our media at a discount, and we don't allow
cannibalization [of the ad-sales business]. At the end of the day, we're a cash
business."

TTG's objectives are to attract new-to-cable advertisers,
as well as to "leverage [smaller accounts] to larger buys" or to get them to
"explore new outlets," such as the Web, Orson said. Moreover, "we're always
looking to create some permanency," he added.

Adding trade to the mix also allows cash-strapped
advertisers to extend their media visibility. When Asian currencies were devalued earlier
this year, for instance, TTG worked with food and toy marketers in the region to salvage
their international media buys, sources said.

In its original incarnation, Turner's entity -- known for
at least one-dozen years as Turner Reciprocal Advertising Corp., or TRAC -- did have a
barter focus, Orson said. But after he shifted from Turner's corporate side to head the
operation in November 1996, he "radically restructured it" to its current
cash-plus-trade orientation.

So far, TTG has enabled Turner's 7,000 employees to buy
discounted hotel rooms, airline tickets, personal computers and consumer-electronics
products, Orson said.

Since the merger with Time Warner, he added, TTG in essence
runs an internal marketing campaign, using brochures and the corporate Intranet to offer
such goods and services to 45,000 Turner and Time Warner employees. That adds up to
180,000 people, including families and friends, Orson pointed out.

Eventually, he said, the plan is for TTG to offer its
discounts to 70,000 Time Warner staffers worldwide, or 300,000 people when counting
friends and families.

"It's been an interesting test for us,"
Swissôtel director of marketing services Nancy Kelleghan said. "We just started to
dabble in the trade aspect" last fall.

The relationship has proven beneficial, she added, since
"[TTG] gives us access to new consumers" -- people who otherwise might not have
booked Swissôtel.

In some cases, TTG's deals have enabled Turner to make
inexpensive corporate use of products, as well.

For example, about one year ago, Turner refurnished its
London offices thanks to a cash/trade deal with furniture company Voko Ltd., Orson said.
And Cable News Network's reporters use satellite phones obtained through a deal with SAT
12.

Perhaps TTG's most significant category has been travel,
Orson noted. Clients within that sector have included Air Canada, Frontier Airlines and
Singapore Airlines, as well as Bass Hotels & Resorts Inc.'s Crowne Plaza and
Doubletree Hotels Corp., he added.

Here, too, the corporation improved its bottom line by
cutting business-travel expenses. Time Warner/Turner personnel also use Swissôtel
lodgings on business trips, Kelleghan said.

Depending on clients' needs, Orson said, the
cash-plus-trade media packages might go beyond cable networks to encompass CNN Airport
Network, the CNN Interactive Web site and the Philips Arena in Atlanta.

At times, they've also included Time Warner syndication
properties, but not ER, so far. (Time Warner is syndicating that off-network drama
series for weekend play while Turner Network Television repeats it in weekday primetime.)

As for other cable companies, Orson maintained,
"Nobody does anything like this." Those that are doing trade deals tend to
concentrate on more traditional barter deals via outside barter firms, he added.

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