INFOMERCIALS ARE IN FOR MUDDLES PROFITS DOWN, TURMOIL UP AS MEDIUM EVOLVES

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The infomercial business is sounding a bit like Susan Powter, one of its own late-night fitness gurus: Industry executives accustomed to making huge profits hawking cookware gadgets are screaming, "Stop the insanity!"

An increasingly crowded market is pushing up the cost of airtime and crimping bottom lines. Major marketers are jumping in and sometimes slithering out again.

One major producer is the object of an unsolicited takeover bid. Another pioneer is in turmoil after reporting a $19 million loss, top management changes and accounting irregularities.

Steven Dworman, publisher of the newsletter Infomercial Marketing Report, said the industry is changing fast.

"It's a very, very quick evolution and maturation of an entrepreneurial business," he said. "You're going to see a lot of changes in the next couple of months."

The boom hasn't yet gone bust: Infomercial revenue-estimated at $900 million in 1993, up 20% from 1992- could top $1 billion this year. But the growing pains continue.

In the "early" days of the late 1980s, inventors and entrepreneurs, spurred by cable deregulation, found a new way to sell $29 salad shooters and other goods with 30-minute programs. They found distributors who would split profits if TV sales outpaced costs.

But many no longer profit directly. Instead, infomercials are being used to aid database development, drive retail traffic, experiment with a low-tech version of interactive TV or simply burnish a brand's image. And marketers less often demand a quick payback.

"The traditional [infomercial] business is very, very nervous. As these corporate players come in, they're going to eat up all the media time and pay large dollars. That changes the rules of the game,"said Earl Greenburg, president of Transactional Media, a Los Angeles infomercial producer and distributor.

"Media costs are going up, celebrity royalties are going up, margins are thinning and competition is going way up," said Guthy-Renker Corp. President Greg Renker.

Two of the biggest players, Regal Communications Corp. and National Media Corp., have found themselves vulnerable.

National Media's board this week is to weigh an unwanted44

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takeover bid from ValueVision International, a Minneapolis-based home shopping network that wants to merge two different but related businesses. ValueVision, which acquired 9.8% of National Media's stock, last week enlisted the help of National Media's former president, Mark Hershhorn.

Regal Chairman Arthur Toll installed new top managers, inherited through a buyout of Inphomation, another infomercial producer. But it expects a $19 million loss for the most recent fiscal year; its accounting firm and chief financial officer resigned amid accounting problems apparently tied to the sale of Regal's 900-line unit.

Hudson Street Partners, Regal's 2-year-old joint venture with Saatchi & Saatchi Co., has aired just one show in two years.

The top five producers account for far fewer top-ranked shows, as measured by Jordan Whitney Inc.'s Direct Response Television Monitoring Report.

"I think their dominance is eroding to some degree .|.|. several of these companies will attempt to maintain their strong market position with strategic alliances," said Publisher John Kogler.

Yet the ranks of infomercial wanna-bes reads like a list of the top 100 advertisers: McDonald's Corp., Mattel, North American Philips Corp., Eastman Kodak Co., Revlon and Estee Lauder Cos. have aired shows recently. Sears, Roebuck & Co. is completing production on tool and vacuum cleaner shows; Wal-Mart Stores and Bank of America reportedly began testing shows this month; and General Motors Corp.'s Buick division and Nabisco Foods Group are said to be considering the idea.

But many pull shows quickly in an industry where, at best, just one in seven shows succeeds.

Said Tim O'Leary, president of TV Tyee, Portland, Ore.: "It's so foreign to how they're [the big corporations] used to marketing that they're having a tough time making the transition."

The flurry of activity hasn't led to the bonanza of business that Madison Avenue expected. DDB Needham Worldwide, New York, has already disbanded a small infomercial unit. Other agencies are struggling with a format they expected to easily adopt.

"Agencies think that because it's like advertising, they should be experts, and they're not,"said Dick Brockway, president of Brockway Direct Response Television, Huntington, N.Y.M

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