"The Chicago Cable Interconnect finally fulfills the promise of cable made 20 years ago," Mr. Martin says.
He is referring to a state-of-the-art, hard-wired, digital system that went live in August and connects 1.3 million of the 1.6 million cable households in the Chicago area.
DIGITIZING PART OF PROCESS
"A commercial comes in from an agency and the first thing we do is digitize it," says Dan Lawlor, general manager of Interconnect, which sells 25% of all the local cable inventory of its seven cable-company members. Furthermore, Mr. Lawlor says he has great flexibility in directing into what homes each spot goes.
"One of the beauties of the Chicago system," Mr. Martin says, "is that I can say I want the first local break in ESPN's 'SportsCenter,' and give subscribers one of five different commercials, depending on where they live." Currently, Interconnect has the Chicago area divided in five different zones.
"I can put a spot for MoPar parts in one zone, Dodge Intrepid in another, Chrysler Concorde in yet another and so on," Mr. Martin says.
While a number of interconnects have similar capabilities, many have to bicycle tapes from head-end to head-end.
"Chicago is state of the art," Mr. Martin intones, "very advertiser friendly. It just gives local cable a terrific advantage."
Just as important to Mr. Martin is, "We get a single billing with all the data we need. Specific brands need accountability. Targeting our ads is going to become more and more important. We're in a transition to one-to-one marketing."
LOCAL HELP NEEDED
Local cable boosters like Mr. Martin are becoming increasingly important as more competitors enter the field of video delivery to the home. TV stations, as they enter the digital era, are expected to offer more targeted services than just the broad-based ones they do now. The Internet, should it become more reliable and able to deliver seamless full-motion video, is another potential competitor. And, direct broadcast satellite certainly will become more widespread by the end of the decade.
SET-TOP BOXES EXPAND
Wink Communications, a West Coast software company, has another technology program to assist cable operators in their one-on-one targeting.
Wink, whose CEO is Maggie Wilderotter, makes software to run in set-top boxes. When installed, a consumer can be watching a commercial for a local car dealer and, prompted by a message superimposed at the bottom of the screen, order a brochure for more details by pushing a button on the box's remote control.
"Wink can also be used with national commercials," says Matt Trifiro, the company's VP-marketing. "A national, or local, spot for a direct-response advertiser can include a message to hit a button on your remote to order-and it's done."
As another example, Mr. Trifiro says a beer company could run an interactive scoreboard as the user is watching a game on ESPN.
Time Warner Cable in Cincinnati plans to soon test Wink ad insertions into Weather Channel programming. Only the system's employees are hooked up now, but soon about 100,000 Wink-capable boxes are scheduled to be deployed in the city. By the end of the year, there should be more than 400,000 boxes distributed nationwide with the technology, Mr. Trifiro says.
The "Keep it simple, stupid" marketing philosophy perfected by McDonald's founder Ray Kroc is guiding Wink, Mr. Trifiro explains. "We want to see what the reaction is to the simpler forms of interactivity before we get to the more complicated things."
For advertisers, the complications brought on by interactivity are substantial. For instance, will an advertiser be upset when a consumer doesn't see his spot in second pod position because the he or she is still interacting with the commercial shown in the first position?
Mr. Trifiro argues that "a consumer isn't going to interact with the same commercial each time it's shown, so the actual incidents of conflict should be relatively [few]."
Furthermore, he says, the interactive element could be limited to the last commercial in the pod so if the consumer misses anything, it will be the program he's watching and not any of the commercials.
"We've had discussions with CNN about making the interactivity work only during the last 10 seconds of the commercial in last pod position," Mr. Trifiro says.
Another strategy cable operators have adopted to fight competition is to develop local news channels. Time Warner Cable, Cox Cable and Cablevision Systems Corp. all see big possibilities with local news.
"From an ad sales perspective, it puts us in absolute direct competition with local broadcast news," says Larry Zipin, senior VP-advertising sales for Time Warner Cable. "That's where there are a lot of dollars."
LOCAL NEWS PITCH
TV stations with strong local news operations can bring in close to half of their total local ad revenue-if not more-selling spots during their news.
Time Warner has had great success with local news operations in Rochester and New York. Orlando will soon have a local Time Warner cable news channel.
"There will be at least two or three more this year," Mr. Zipin says. "We have a team that hopes to do four or five full-blown launches a year."
The business plan, he adds, calls for each of the news channels to become profitable "in a relatively short period of time.".
One of the primary offerings driving the local cable news product has been, and will continue to be, weather, Mr. Zipin notes.
Mr. Zipin also is excited by the ad possibilities of Star Response System. Star has been in use for a number of years in a cable TV system in San Antonio that Time Warner, the nation's second-largest multiple systems operator, now owns.
Designed to work in the analog world, Star Response allows two-way interactivity by having cable subscribers hit various buttons on their remote controls in response to various prompts superimposed on the screen.
"Just having a system like Star Response gets us into dialogues about what advertisers are looking for, and what the potential is, that would just be academic discussions if we didn't have this specific product," Mr Zipin says.
Mr. Zipin says one marketer who's been enthusiastic is Warner-Lambert Co.
The executive relates the story of one cable employee in San Antonio who now refers to herself as the "Listerine Lady."
"One of the early testers of Star Response was Listerine, and the reply got you a free sample," Mr. Zipin says. "So there she was in San Antonio, delivering thousands and thousands of sample bottles of Listerine to the local post office to be sent out to respondents."
Time Warner plans to launch Star Response in four or five more cities scattered throughout the country.
"That will spread the notion of interactive applications on a much wider scale," Mr. Zipin explains. "Then we can move from an analog environment to a digital one."
But that will also involve fulfillment. "That literally is the next step-to get