Infomercials are here to stay as an advertising-revenue
source for cable networks and operators, but the future course of the business may find
these program-length commercials becoming more like entertainment programs than like
hard-sell spiels.
While infomercials -- more formally known as
direct-response advertising -- have grown steadily as a presence on cable over the last
few years, programmers and operators offered differing visions of the next phase of their
relationship.
Infomercial suppliers predicted a steady rise in the number
of hours and channels devoted to infomercials, thanks in part to the advent of digital
tiers. They also envisioned becoming closer partners with cable operators, with
revenue-sharing becoming a more common deal structure.
But cable operators, while happy to sell off
'remnant' airtime that would otherwise go begging (especially during the early
morning hours), appeared hesitant to fully embrace the infomercial industry.
Dan Gold, president of Century Communications Corp.'s
cable division, said he did not think that revenues from infomercials would become
'very much more prominent' in the next two years.
Gold also said Century was in no rush to move away from
selling airtime to partnering with infomercial suppliers and taking a percentage of the
sale of individual products.
'That's not a business that we particularly want
to be in,' Gold said.
John Collins, general manager of Time Warner Direct, an
advertising division of Time Warner Cable, praised infomercial programmers for adding
revenue and 'delivering value' to cable systems, but he agreed with Gold that
Time Warner would rather structure a deal based on guaranteed revenue per subscriber than
on a percentage of the sale.
'We don't want to be partners,' Collins
said. 'We're not in the infomercial-production business. And the upside [of
revenue-sharing] is negated by the downside.'
Nor should infomercial producers count on digital channels
to provide a cornucopia of distribution for their products -- at least not yet.
At MediaOne, for example, Ed Dunbar, the MSO's new
vice president of advertising sales, said infomercials will have to wait in line for
digital time. 'There are a lot of other things that we have to focus on before
[infomercials] become a key part of our strategy,' he pointed out.
Operators are hardly turning their noses up at the
sometimes tacky, sometimes wacky world of psychic friends, abdominal flexors, skin-care
products and something-from-nothing real estate fortunes, however.
NIMA International estimated that infomercials pumped
approximately $300 million into cable last year. GRTV, the cable subsidiary of infomercial
giant Guthy-Renker Television, alone spent $70 million on buying advertising time on
cable.
'This is found money for cable, and a lot of it,'
said Ben Van De Bunt, executive vice president of Guthy-Renker. 'Cable fragments
media more and, therefore, it gives us a more direct opportunity to deal with our
customer. Cable's size of the [infomercial] pie is increasing, and we see business
growing 10 percent to 15 percent annually.'
Elissa Myers, president of NIMA, called cable 'the key
driving force' propelling the growth of the infomercial industry.
In particular, infomercials on local systems provide
'an ideal testing ground' for new products, Myers said. 'Local buys,'
she said, 'are affordable, and they can be very targeted.'
In fact, Access Television Network -- a major infomercial
producer that employs celebrity pitch people such as Dick Clark, Victoria Principal and
Dionne Warwick -- estimated that local cable accounted for 25 percent of the
cable-infomercial business last year, up from only 5 percent in 1994.
Access president Bill Bernard said business, fueled by
local growth, is 'wonderful,' pointing to an estimated $22 million in revenue
for the company for fiscal-year 1998, which concludes at the end of this month, up 37
percent from $16 million in 1997.
In fact, the infomercial business is so appealing that for
the past year-and-a-half, Jones Intercable Inc., Cox Communications Inc. and Adelphia
Communications Corp. have been joint-venture partners in Product Information Network, a
leading cable-infomercial supplier and a dedicated infomercial channel with approximately
9 million subscribers.
According to PIN chief operating officer Jon Shaver, the
network is on 24 hours per day in 60 percent of its homes, and demand from cable operators
is growing.
Shaver contended that the infomercial business has turned a
corner with the demise of 'fly-by-night' companies. 'The 'Wild
West' days are behind us,' he asserted. 'The stigma is going away.'
Jack Olson, vice president of Media Partners,
Adelphia's ad-sales division, agreed.
'Infomercials are widely accepted now,' he said.
'The products that they sell are better, and people have more confidence in what they
see advertised.'
In fact, the infomercial industry hopes that more
'mainstream' advertisers will begin to increasingly use the medium to convey
information about products and to generate leads, and not necessarily to sell products
directly, thereby taking the programming further away from its
traveling-salesman/hard-sell roots.
Michael Wex, president and CEO of GRTV, which produces
infomercials featuring such celebrities as Fran Tarkenton, said he expects more Fortune
500 companies to use direct-response programming this year.
'The quality will continue to get better,' he
said. 'This is a business that's growing up fast.'
Shaver said recent infomercials by major corporations like
Sony Corp. and Toshiba Inc. pushing their digital versatile disk players will prove to be
the prototype of the kind of mainstream programming that he expects to become more
prominent on PIN.
'There's an element of direct sell in these
programs,' Shaver said, 'but they're used more to create awareness, to
educate the consumer and to generate leads.'
Infomercial producers also said they plan to produce more
'entertaining' programs that are closer to regular shows on cable than to
infomercials.
For example, PIN is working on a travel show with Robin
Leach where content would be provided by travel companies, and on a program produced with
drug companies that will dispense medical advice.
Bernard agreed that programming in the future will evolve
further away from the traditional half-hour infomercial model.
'The lengths of the programs will be shorter,' he
predicted, 'and the positioning will be much more entertainment-oriented than it is
now.'
Infomercial programmers are also convinced that the
industry will expand their business beyond television into areas such as direct-mail,
catalogs and even retail, perhaps with the help of cable operators.
'I think that there are new ways for operators and
direct-response marketers to work together,' Wex said. 'There are a lot of
possibilities.'
He cited Cablevision Systems Corp.'s recent purchase
of the bankrupt Nobody Beats the Wiz consumer-electronics retail chain as just such an
opportunity for synergy with cable operators.
'I'm looking forward to talking with them,'
he said.
