Leaders in place-based media (chart) FLOPS FAIL TO DERAIL PLACE-BASED WHITTLE, TURNER TAKE THEIR LUMPS, BUT OTHERS UNVEIL NEW VENTURES

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The coming months will see a rush of start-ups in place-based media, but despite the surge, the size and scope of future growth remain a hotly debated topic.

Place-based media has been growing at a scorching 50% annual rate, but casualties in the $700 million field have included some of the biggest names in media entrepreneurship.

The market-ranging from such extremes as magazines to video screens on shopping carts-is still evolving, and failures such as the shutdown last week of Whittle Communications' Medical News Network demonstrate the dangers.

Company Chairman Christopher Whittle said originally he hoped to spend up to $200 million over 21/2 years for MNN equipment and development. MNN had been in test development for more than a year and was going to TV terminals in 5,000 doctors offices.

Insiders say Whittle is still trying to hammer out some kind of deal to sell the system to Reuters Holdings or some other buyer but ran out of financing before it could close a deal. That deal stalled over price and in part because Mr. Whittle wanted his company to continue to have a minority equity stake.

Reuters reputedly wanted no part of such action and instead scooped up the assets of the much smaller Geo Medica in New York and Atlanta, which had been testing a PC-based health information system in only 90 doctors offices.

It was Whittle's second big flop in six months. Last February, it was forced to shut down the Special Reports magazine and TV channel in doctors waiting rooms due to dwindling ad support.

The latest failure follows by one year the shutdown of a similar lofty venture, Ted Turner's supermarket Checkout Channel.

Another bold, and ill-fated, video-based endeavor was VideOcart. Information Resources Inc. in 1989 began putting the ad-supported screens on shopping carts. IRI would later spin off VideOcart, and last December, VideOcart filed for Chapter 11 bankruptcy protection.

Despite the high-profile failures, industry executives today estimate the place-based media market at $500 million to $700 million, averaging about a 50% annual growth rate since 1992. So far, however, the growth seems fueled by relatively simple products such as in-store automatic coupon machines rather than capital-intensive creatures such as dedicated, out-of-home TV.

Place-based media still has its adherents, chief among them an undeterred Chris Whittle.

"I still think someone is going to win big in healthcare, and I'm disappointed that it's not us," he said.

Some ad agency executives also remain enthusiastic.

"Place-based media is like the Wild West of the American frontier," said David Verklin, managing director of Hal Riney & Partners, San Francisco. "It's an exciting freewheeling brawl, and there's a new idea coming to town every week."

Among the latest ideas:

The Good Health Channel is trying to succeed in doctors waiting rooms where Whittle failed. Philip Cohen, with backing from Tampa, Fla.-based Evro Financial Corp., said he hopes to be in 1,500 pediatric offices by the end of this month. Three advertisers have signed: MasterCard International, Helene Curtis Industries and Safety First. A second program aimed at veterinarian waiting rooms will carry advertising from Alpo Pet Foods and others. It should also reach 1,500 offices.

NBC On-Site, a joint venture among NBC, Fleming Cos., KDI Corp. and Site Holdings, plans an aggressive rollout starting this fall. On-Site is being positioned as an "out-of-home TV network" to be packaged as another "daypart" of NBC. The goal is to reach a critical mass of supermarkets and other mass retailers nationwide.

Turner Private Networks, since the shutdown of the Checkout Channel, has focused on its only existing place-based network, CNN Airport News (formerly the Airport Channel). Currently in most of the major airport hubs, Turner is taking the service national this year and is looking to develop an in-flight component to be sold as part of the package.

Metro Vision of North America has entered into a definitive merger agreement with Site Holdings. If shareholders approve the merger, Metro Vision's Commuter Channel and Flight Channel will be folded into Site. The Commuter Channel currently is installed in transportation centers in New York, Chicago, San Francisco and Philadelphia. The Flight Channel is in Syracuse/Hancock International Airport and is being installed in New York area airports.

One new TV channel is even heading for shopping mall food courts. Steve Bowen, from 1987-91 president-chief operating officer at J. Walter Thompson USA, New York, and now president-CEO of Food Court Entertainment, thinks he has a winner with Cafe USA.

In a field test at the Haywood Mall in Greenville, N.C., earlier this year, Mr. Bowen attracted advertisers including Ford Motor Co., Revlon, Foot Locker and Nike. Consumer recall for the ads was about three times higher than conventional broadcast ads, he said.

In January, Mr. Bowen plans to launch the half-hour programs of entertainment, fashion news and locally tailored commercials in five malls. He thinks he can avoid some of the blunders that plagued Turner's supermarket TV show.

Checkout counter TV "was hitting consumers with a commercial message after they had made a purchasing decision and were standing in line with a basket full of goods," Mr. Bowen said. "We're hitting the people when they are relaxed, sitting down to eat with $100 in their pocket."

Despite the rush of new arrivals, the spectacular failures by Whittle and Turner raise new doubts on the long-term prospects of place-based media.

"Placed-based media eventually gets down to a basic question: Is anyone watching or reading it?" noted Richard Kostyra, president of Media First International, an advertising consultancy.

"Advertisers are holding placed-based media to a much higher standard than traditional media," said Michael Wolf, a partner and director of the media and entertainment group at management consultant Booz Allen & Hamilton.

It's difficult for advertisers to reallocate a portion of the tight media budget to the relatively new arena of place-based, he said, unless three tests are met:

The medium must reach an audience that's not easily addressable by traditional media.

The audience must be of unique interest to advertisers.

The impact must be measurable.

There have been some resounding success stories in place-based. Actmedia, Norwalk, Conn., racked up $216.3 million in revenue last year, primarily from its supermarket aisle coupon machines. Catalina Marketing Corp., St. Petersburg, Fla., did $91.4 million in fiscal '94 from its coupon dispensing devices at checkout counters.

Two years ago, Time Inc. purchased Media One, a company that makes lighted ads mounted above checkout lanes in supermarkets. Time Inc. In-Store Marketing Group has already managed one-year contract renewals with companies like RJR Nabisco and Kraft General Foods, and the company predicted fiscal '94 revenue will rise "between 15% to 20%."

And let the record show that Mr. Whittle has not been without his place-based successes. The controversial "Channel One," which commercialized educational TV in schools, has been a winner. Sources familiar with the operation say it's pulling in revenue of about $85 million a year.

Maybe the best advice to would-be placed-based wizards is to keep it simple.

"Whittle had some good ideas," said Herbert Maneloveg, president of consultancy Maneloveg Media Marketing Services, Otis, Mass. "It's just that he was too grandiose and couldn't wait until tomorrow. He tried to run before he was able to crawl."

Joe Mandese contributed to this story.

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