At CTAM: New Products, Old Issues

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More than 2,400 attendees came away from the Cable & Telecommunications Association for Marketing's Summit last week with lots of tips on how to market such relatively new wares as digital cable, high-speed cable modems and video-on-demand.

The conference agenda also included sessions on customer retention, customer service and, of course, branding.

There was even lots of discussion about advertising sales, mostly sparked by speculation on the projected hefty growth of VOD and digital video recorders (DVRs).

As consumers gain more control over when they watch television programming, due to the expected growth of DVRs, advertisers will have to find better ways to reach them, as some CTAM speakers noted.

Forrester Research Inc. principal analyst Josh Bernoff cited projections that within five years, there could be as many as 46 million DVR households, while VOD households may total 36 million.

"The 30-second commercial will never be the same," he said.

The Carmel Group also released a new study at the Summit which projects that DVRs, also called personal video recorders (PVRs), would penetrate 25 percent of U.S. TV homes in 2008, up from 1.5 percent this year.

80% SKIP THE ADS

SONICblue Inc. CEO Ken Potashner said his company's Replay TV customers watch 30 percent more TV, "but they skip 80 to 85 percent of the commercials."

Starcom Mediavest Group president Rishad Tobaccowala remained optimistic.

"The 30-second commercial is not going to go away," he said. "Even in five years, it's not going to be an all PVR-driven world."

Still, to truly reach consumers in that climate, advertising must become more appealing, targeted and relevant, various panelists said.

"People dislike advertising that's not for them," Tobaccowala noted. "If there were a Cosmetics Channel, I have no doubt my daughterswould watch it."

Similarly, FX Networks CEO Peter Liguori contended that if and when TiVo Inc. does become a threat, "It's incumbent on Madison Avenue to create more interesting ads."

And Rainbow Media Holdings Inc. CEO Josh Sapan said, "There should be on-demand brands" for a space which "lives only on the server, not the TV."

So far, Insight Communications Co. has committed to Rainbow's Mag Rack special-interest VOD package, the first Insight market will launch Mag Rack within 30 days, he said.

There are no other affiliate or advertiser commitments so far, he added, although rumors Comcast Corp. was testing the service in one market spread at the show.

Last Thursday, Cox Communications Inc. and Universal McCann — the media-buying arm of McCann-Erickson WorldGroup — announced that they'll explore new advertising opportunities in VOD. The first market to be studied is San Diego, where Cox's digital-cable subscribers have access to its ad-supported VOD channel.

The Coca-Cola Co. and Sony Music Entertainment's Epic Records are the first Universal McCann clients to advertise on that VOD channel, dubbed the "FreeZone."

BRAND NEW BRANDING

During a session titled "It's a Brand New World," three cable programmers — American Movie Classics, Court TV and FX — touched on their different branding tactics.

Court TV CEO Henry Schleiff played a current Memento
-inspired cinema commercial themed, "Join the investigation." He then described the network's mission: "We are the place, day and night, for investigation."

That's in sharp contrast to its positioning in the first year or so, when "we concentrated on the crime."

American Movie Classics executive vice president and general manager Noreen O'Loughlin described he network's rebranding as an opportunity.

"The challenge is to move the brand forward" and target movie fans in their 30s and 40s, she said.

"TCM [Turner Classic Movies] has the older part of the niche," she said, but AMC is out to redefine the genre, focusing on newer films like Animal House
and the Indiana Jones
franchise. Last month, 40 percent of the AMC schedule consisted of 1980s films, noted O'Loughlin, while 25 percent of feature from the 1970s and the balance were older titles (plus a couple from the '90s).

FX's Peter Liguori said the best branding mechanism is the network's lineup.

"Our programming is more the brand driver than anything," said Liguori, citing The Shield
as a case in point. "I don't believe people watch networks."

When moderator and Multichannel News
editor in chief Marianne Paskowski asked Liguori if he was worried about sponsor pullouts from The Shield
in these tough times, he replied, "It's happened previously with NYPD Blue
[on ABC] and others that mined new territory."

In replacing those defectors, "we've netted out positive," he added. "We did replace lower CPM [cost-per-thousand advertisers with higher CPM advertisers."

Still, he noted, "We're not out to push the boundaries" of taste with more such primetime shows. Rather, the key for FX is "great storytelling," he said.

Edge also isn't an option for Court TV, said Schleiff.

"We can't go out there with a South Park … or an Osbournes, or even The Shield," he said. "We're not trying for edge. We can't push something too over the top."

Court TV fared well in the 2002-03 upfront ad-sales marketplace. "We had a really good upfront," Schleiff said.

Some other networks, like USA Network and Lifetime Television, wrote their upfront business at substantial rate cuts — a move FX opted not to take, said Liguori. He warned that those networks will operate from a "way lower base" once times improve, so FX opted to "hold the line" on its upfront pricing.

"In the current environment, the smart will survive," Liguori said.

At the conference, Viacom Inc. president Mel Karmazin made note of a trend: CEOs are shifting dollars from marketing toward the bottom line. Former The Coca-Cola Co. chief marketing officer Sergio Zyman called that trend "ridiculous."

"Marketing is about making money," said Zyman, who now heads the Zyman Marketing Group. "Marketing is about selling more stuff to more people more often for more money more efficiently."

The problem is that "marketing as we know it has failed," he said

Zyman suggested that marketers focus on increasing the frequency of existing customers' repeat purchases and "control the dialogue — define and deliver." That's what DirecTV Inc. has done in its competition with cable, what Coke and Pepsi-Cola try to do in their ongoing clashes and who JetBlue now defines what travelers should look for in an airline.

"Agencies are part of the problem," he contended, since ad shops often create ads to win awards rather than sell product.

Taco Bell, for instance, "got carried away" with its "Yo quiero Taco Bell" campaign starring a talking Chihuahua, Zyman maintained. In another instance of "the consumer buying the advertising, but not feeling compelled to buy the product," Zyman said Budweiser's sales and market share hit a six-year low during the beer brand's popular "Whassup?" campaign.

OPS NEED BUNDLES

Cable operators are looking for more successful campaigns to use in marketing their own new products and services to consumers.

One strategy that seems to have clicked is bundling. At a time when "video is no longer the only key to our growth," moderator Hilda Chazanovitz — National Geographic Channel's executive vice president of marketing and new media — said bundling video with high-speed Internet access and telephony services has become increasingly important to operators.

Jaye Gamble, the regional vice president of Comcast Corp.'s metro Washington, D.C./Virginia cluster, detailed the various offers the MSO has made since 1998. Its goals included "driving trial and therefore adoption," and reducing customer churn.

"Bundling is all about adding value," he said, "but value is very subjective" — even among individuals in the same household. "You can add too much value and you have to watch your margins," he also warned.

Insight Communications Co. senior vice president of operations Gregg Graff said his MSO also has tried numerous offers, including its current baseball-themed "Triple Play" and "Double Play."

The former — which packages digital cable, Internet access and telephony — is priced at $89.95 and includes free installation during the promotion period (versus the normal $117 bundle price). The Double Play is pegged at $79.95 (versus the regular $95).

Graff, who said that the Triple Play is becoming Insight's top bundle, estimated that monthly churn rates are below 1 percent each for the video/telephony package, the video/Internet package and for the three-service bundle.

The churn figure rises to 5 percent each month for telephony alone and to just over 2 percent each for video or high-speed alone.

AT&T Broadband vice president of electronic marketing and integrated product strategy Mark Voboril said that 1.6 million of its customers now take bundles of two or more services, and that churn has been cut by 20 percent to 40 percent in its different markets.

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