Baby Bells in talks to shift funds to TV nets

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The Baby Bells are in talks with leading broadcast TV networks with the goal of shifting tens of millions of media dollars from local TV stations to the nets.

The talks could eventually lead to a windfall worth hundreds of millions of dollars.

Bill McKerron, executive director of media services for Bell Atlantic Corp., confirmed the discussions but declined to elaborate.

Executives familiar with the talks said Mr. McKerron has put together a briefing document for the other Baby Bells that describes how the rivals could work together to buy national ad time.


For example, time could be bought on NBC's "ER," with ads for each of the Bells appearing, simultaneously, in different regions. So viewers in New York would see an ad for Bell Atlantic, while viewers in Atlanta would see one for BellSouth Corp.

(The other Baby Bells are U S West, SBC Communications and Ameritech Corp.; SBC's proposed acquisition of Ameritech is pending.)

For antitrust reasons, the Baby Bells are not actually allowed to pool their money. But they could, under one scenario, approach a network and say that each telco has a certain amount of money to spend and wants to reach certain markets with ads that would run simultaneously with spots for the other Bells.

"We'll go as far on this as we're allowed by the antitrust lawyers," said one Baby Bell official.

Hank Levine, a telecommunications lawyer at Levine, Blaszak, Block & Blothy, Washington, said the cooperation between the Baby Bells in buying national TV time did not appear to violate either antitrust laws or the 1996 Telecommunications Act.


"This sounds like an advertising co-op, and those are well-recognized," he said, adding that the move seems "like a creative effort to achieve economies of scale."

In addition to Mr. McKerron, executives at BellSouth are said to be closely involved in the discussions. "We are always looking for creative ways to reduce our media costs," said a BellSouth spokesman, who declined to comment on specific plans.

The networks and Baby Bells are looking for a win-win situation. The Bells want to reduce the cost of buying local TV time in hundreds of markets. The networks want revenues they don't now get.

A major factor fueling the talks is the consolidation of the Baby Bells, which now cover much larger regions than before. Bell Atlantic, for example, now encompasses the former Nynex, and has a deal pending to acquire GTE.

The networks are particularly interested in the Bells' corporate ads, a category that totaled close to $50 million in total spending last year, according to Competitive Media Reporting. The nets also see a lucrative future when the Baby Bells win approval to market long-distance services.

"As they each take on AT&T, Sprint and MCI in their service areas, you're going to see heavy spending. I would predict hundreds of millions of dollars. Ultimately, that's what we're after," said one network sales executive.

The Baby Bells currently spend the bulk of their media dollars on local TV ads for consumer, business and mobile services. Those budgets aren't likely to shift to the national networks, at least in the short term.

"First, I don't think the networks could compete on price on [that] stuff, and they usually require a different ad in every market," said one telco executive.


But "with digitalization, it makes it far easier to turn on lots of different messages in lots of different markets, so what will happen in the future along these lines is anybody's guess," another telco executive said, adding, "That's more an issue between the networks and their affiliates."

The networks usually accommodate regional ads that can be split between 8 and 12 markets. They have the capacity to do more, but have not chosen to push the issue with affiliates.

Copyright September 1998, Crain Communications Inc.

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