MAKING A PLACE FOR ADVERTISING IN NEW WORLD OF INTERACTIVE MEDIA

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After his speech, Procter & Gamble Co. Chairman-CEO Ed Artzt took questions from the audience. Here is an edited transcript

Barbara Grufferman, senior VP-group publisher, Enquirer/Star Group: You and P&G are clearly leaders in marketing and advertising. How will your view and use of print change, vis-a-vis the changes that are happening in TV and broadcast? ...

Mr. Artzt: Well, print's pretty important to us and will continue to be and will grow as a percentage of our revenues, I'm sure. Today, we're spending $300 million on the print medium-that's approximately 10% of our total budget. I think print is going to become interactive as well and already is ...

Jim Guthrie, exec VP-marketing development, Magazine Publishers of America: Being from the MPA, we would like to be in the dialogue. We've got more than 200 magazines that are involved in interactive TV, online or CD-ROM activities right now. All of them are exploring advertising as well as editorial as a source of revenue.

We would like that exploratory partnership from everybody in this room ...

Ave Butensky, president, Television Bureau of Advertising: For the last year or so, we have been up to our knickers talking to advertisers and television stations about the great value of interactive television for advertising. Preliminary tests ... show that commercial recall does increase and there is a great, great role for advertising. We are looking at this thing as very positive ...

Mr. Artzt: One of the things I think that the industry needs to deal with is this issue of the ability of new technology to excise advertising from material that's televised into the home. That could be a real serious problem and could upset the apple cart that you were just describing a minute ago that looks so promising.

Sean Fitzpatrick, vice chairman-North America, McCann-Erickson Worldwide: Given that interactivity and integrated marketing and relationship marketing are perhaps not the future but today, would you please comment on the changing nature of the architecture that binds agencies and clients? ...

Mr. Artzt: Well, I think that they'll probably change back, in some respect, to what they were a couple of decades ago ... The basic entertainment that guides television viewing in the home, family entertainment in the home, will be-and I do believe this without question in my mind-will become so program-driven then, unless agencies together with clients develop an involvement in expertise in program development ... Now that raises the question ... of should the agencies be thinking in terms of having to re-establish significant programming departments to guide the development and production of properties for their advertisers.

I'm not sure that is the case, I'm not sure that's what's needed. Because since the '40s and the '50s and the '60s ... a whole industry has sprung up of companies that specialize in that. The Viacoms, the Time Warners, and the Disneys and all the rest of them that specialize in investing in programming and marketing it to these various media providers ...

What I think we are going to have to do is work together. The architecture change that I see is that the agencies and the advertisers will work together to invest in the development of programming almost in the same way that we invest in research & development for our products. Bob Herbold, who heads up our advertising operations at Procter & Gamble, has been talking about literally creating a programming R&D budget in the company, something that we haven't had in a number of years ...

But we do not have a development capability nor do we have in our working relationships with you, our agencies, a development capability that actually seeks to gain ownership and control of important properties that later on will have integrated advertising in them. How we do that, since the agencies can't really be expected to develop the expertise to compete with the Viacoms and the Time Warners, is a question for this industry group to address. We are addressing it in our company right now, and I think one of the first things we are going to do is implant seed money in the development of new programming ...

Marcella Rosen, president-CEO, Network Television Association: You mentioned that the consumer certainly has great advantages with free television and would prefer to stay that way. I think all the potential expansion of pay-per-view is going to be limited by the amount the consumer is willing to pay ...

Another subject is a study we did recently on the number of channels received per household vs. the number viewed, and we found that the average American household gets 36 channels and watches 13 channels. When they have 80 channels, when they double the number of channels, the household then watches 14 channels ... the point is that the bottom line is programming, which is what you were talking about, and calling for more advertisers to own their own programming. And I'd just like to suggest that perhaps the answer is more programming partnerships, and if you're going to do that, then the people who have the most expertise and success with developing programming are the networks, and probably more conversation should be going on between advertisers and networks and their agencies. Agencies can play a major role even without producing programming. ...

Mr. Artzt: We talked with the heads of all the networks about this in great depth and they encourage us in both directions-go do it yourself and come do it with us.

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