• by October 22, 2002

It's amazing what people will do when they have something new. Take the curious case of "Madison's Wedding," a locally produced video-on-demand project on Time Warner Cable's Raleigh, N.C., system.

"Madison's Wedding" documents the marriage of Madison Lane, a popular radio personality in the market. The video, all 98 minutes of it, was offered for sale to the cable company's 130,000 customers. An experiment, said Time Warner Cable. A promotion, said WDCG-FM, Lane's station.

Backed by a ton of on-air mentions on the radio station, "Madison’s Wedding" turned out to be VOD's first best-seller in Raleigh. At last count some 2,500 households — about 2% of the cable operator's digital-capable customers — had plopped down $9.95 to watch the wedding, interviews with the bride and groom, and scenes from a bachelorette party. Time Warner and WDCG shared the revenue from the project, which generated about $20,000 in sales the first weekend it ran. Demand was so great that Time Warner extended the run by a week.

Of greater significance, however, is that the success of the program indicates that people will pay extra for original content. It's a point the cable industry should consider as it seeks to foist a slew of movies and repurposed reruns upon takes of its nascent VOD services. Cable operators are looking to VOD and other advanced services for lots of revenue, and to give them a real leg up on the incursion from satellite providers like Dish Network and DirecTV. They are even looking for ways to insert ads on VOD streams.

Sure, original content made specifically for VOD distribution would be more expensive, but if the Raleigh experience is any measure, it bears further examination.

Josh Sapan, the president and CEO of Rainbow Media Holdings, said as much in a recent address before the Washington Metro Cable Club. If VOD becomes only a warehouse for the same content offered by traditional networks, he said, "cable is likely to experience high rates of churn and lose a potential competitive advantage over satellite."

Sapan does have an ulterior motive. Rainbow is hawking to cable operators a product called "Mag Rack," which delivers two dozen video channels on a variety of niche topics, one of which is weddings. Hey, this could be a hit.

Since the Librarian of Congress instituted webcasting fees in a watershed decision in late June, 95 Internet-only stations and two terrestrial networks — Entercom and Yahoo! — have stopped streaming. But the impact this will have on streaming advertising is negligible.

In fact, the fees will "have no impact on Internet radio advertising," according to Steve Goldberg, president of Hiwire, the leading Internet radio advertising rep firm. The stations that have stopped streaming are "very small entities, none had the reach to be a top-shelf advertising program," he says. Meanwhile, "the larger entities will continue to try and sell advertising, and the advertising community will have a choice that represents real value for clients."

Goldberg adds, "If the bottom 500 streaming entities disappear, a good set of content will be lost. But from an advertiser's perspective they could make a buy on any of the top 10 streaming entities and capture the same reach as the bottom 500." Another perspective comes from Kevin Shively, director of Internet media for Beethoven.com, an Internet-only station that generates revenue from advertising that will "possibly cover the fees," he says. "We'll have to pay thousands of dollars a month, more than we have to pay ASCAP and BMI in a year," he says.

Internet radio advertising has been slow to develop, in part because of the controversy surrounding the fees, Shively says. "Advertisers are reluctant to adopt the medium because of the lingering question of whether we can survive the royalty payments," he says. "They're hesitant to invest based on the fear we might not be there tomorrow. It's hindered our ability to move forward with the standard business model."

Still another perspective comes from Bill Grywalski, president of Surfer Network, a group of 60 Internet stations, almost all of them terrestrial stations. He believes the fees may encourage stations to use their own sales forces more often to sell advertising, instead of relying on the Surfer Network or companies like Hiwire. "When we talk to radio stations about streaming, we talk about the ability of their sales team to sell inventory.

They're in the best position to sell additional inventory and create nontraditional revenue opportunities. With the imposition of the fees, stations may be more interested in using their own resources to sell additional inventory, because it will enable them to raise more money they can use to pay the fees."

Less Convenient and More Complex
by Steve Smith, popeyesmith@comcast.net

The synergy dream of the past two decades always involved TV/mag/Web/radio conglomerates easing the burden for buyers by offering one-stop shopping across platforms. But here in the media-recessed new millennium, the reality is that integrated deals are less convenient than they are complex and highly individualized.

For instance, P&G, through its agency MediaVest, announced that it is buying big ($50 million reportedly) across Discovery Network’s cable, online, and storefront properties. While details are scant, we don’t seem to be talking about cut-and-dried inserts for Charmin and Head & Shoulders here, but things such as product placement in some shows, in-store promotions at the mall and the P&G mainstay, sweepstakes entries everywhere and anywhere. Like Clear Channel (see below), the media company just launched its Discovery Solutions group (run by VP Amy Baker) to design just these sorts of programs.

Along with autos, travel was one of the few online categories to avoid a good singeing from the great dot-bombing of 2000–2001, and so its properties remain credible offline marketing partners. To wit: Nickelodeon and Trip.com have booked passage together for co-branded travel deals for families. Look for a dedicated Nick Jr./Trip.com site this fall and a coordinated on-air/online campaign that reaches across the partner’s sites, Nick’s cable properties (Nick at Night, TV Land, et al.) and even CBS, where a Nick Jr. show also runs.

And here’s another novel promotional platform to drag into your ad buy mix … paint cans. As part of its multi-multi-multi deal with Home Depot (as in multi-year, multimillion-dollar, multi-faceted), Disney not only places the retailer’s brand across its TV/cable properties but also co-brands a paint kit for kids. Oh, and the mighty rodent of Burbank also agrees to buy goods from Home Depot for some of the company’s operations. Yeah, well, we can’t wait to see Eisner figure out which aisle has the untreated lumber in that place.

Which is not to say that media moguls have woken from that old one-stop-buy dream. Clear Channel claims its Advantage program, which merges former "synergy" and "group sales" teams, will make it easier for advertisers to assemble "single point of contact" packages. The company wants to see clients move fluidly across TV, outdoor, entertainment, and radio venues. The announcement quotes radio president and COO John Hogan promising (without a molecule of irony, mind you) to "build an elite team of super-sellers." Actually, judging from the media companies that have actual cross-media deals to announce and not just another sales division, it takes something more than super selling to pull off integrated deals. It takes marketing creativity.

Online

Three Giants Gone

by Masha Geller, masha@mediapost.com

All this talk about the summer doldrums knocking the wind out of the online industry may have something to it. During the last few weeks, three companies that could be credited with founding the Internet advertising media business, are, well, out of business.

The biggest exit from online media was DoubleClick’s Media Unit, which was sold to L90 – now MaxWorldwide – in early July for approximately $9.5 million in stock and cash. DoubleClick will have a right to receive an additional $6 million in the future, contingent upon certain performance conditions being met. According to DoubleClick’s most recent earnings report, the majority of the company’s losses came from its media unit. Thanks to the sale, DoubleClick reported a net profit of $4.1 million, compared with a loss of $37.9 million the year before. The company said the biggest decline in revenues came from its recently sold media business, where sales fell to $10.8 million from $33.8 million.

This doesn’t mean the granddaddy of online media is really gone. For starters, DoubleClick’s Chairman Kevin O’Connor has joined the MaxWorldwide Board, along with some senior members of DoubleClick Media’s management team. More importantly, the deal makes MaxWorldwide the largest company in online ad sales and representation, and "will give advertisers a new choice in online marketing services and reach on par with AOL, MSN and Yahoo." The transaction also allows DoubleClick to focus on its technology and data marketing products and services.

The second big exit was Jupiter Media Metrix. The company sold its survey panel to comScore, it’s AdRelevance unit to Nielsen//NetRatings and its event business to INT Media Group. As a result, the company has received a delisting notice from Nasdaq, which JMM said it would fight, although many are asking, "why bother?"

This is also not as bad as it sounds. The most valuable divisions of the company are safe. Most importantly, thanks to the Media Metrix panel, comScore has been put in position to work on the one of the most significant developments in the history of syndicated Internet audience ratings – scheduled to launch in November, Media Metrix 2.0 will expand the Media Metrix U.S. sample from 60,000 to more than 120,000 Internet users. Experts are saying this will lead to comScore winning the gold in this service category of a network approach to online customer/audience research.

The third exit, sadly, has no upside. Ziff Davis Media's Yahoo! Internet Life announced in July that the title's August issue would be its last. The magazine was once the bible of the industry, but due to market conditions and other familiar reasons has found it impossible to survive.

With the big three reconfigured, there is serious doubt once again about the health of the industry overall. Not to worry. The IAB recently asked the investment experts at Thomas Weisel Partners to take an in-depth look at Interactive Ad company profitability. TWP found that 75% of online ad businesses will be profitable on an earnings before interest, taxes depreciation and amortization basis by end of this year.

That’s certainly something to look forward to.