MARKETERS LEERY ABOUT ADAPTING TO SYSTEM

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ORLANDO-Advertising and movies on demand will provide the revenue streams to support interactive TV systems, Time Warner Chairman-CEO Gerald Levin says.

But while there were several dozen movies to choose from at Time Warner's Full Service Network unveiling last week, marketing applications were few and far between.

Barry Layne, VP-director of Ketchum Interactive Group, Los Angeles, said marketers are intimidated by the costs and challenges of building interactive TV applications. While studios can simply digitize existing films for video on demand, marketers have to do more than digitize existing TV spots.

"The technology is forcing marketers to create all-new brands and messages," he said. "That's why we're not there."

Chrysler Corp., originally slated to be one tenant in an Auto Mall, is the sole automaker involved in the launch. The U.S. Postal Service is also there, as are a handful of retail outlets, including Spiegel, the Nature Co., Crate & Barrel, Sharper Image and Williams-Sonoma. Time Warner is operating two mall areas, the Warner Bros. Studio Store and Viewer's Edge. Others will be added later, like Procter & Gamble Co.'s Cover Girl and SmithKline Beecham.

Mr. Levin insists he's not worried about marketers that have backed away from the trial to focus on online services and CD-ROMs. "Advertising will come to become an important part of financing this system because this is a way for [marketers] to play a role as a trusted source of information," he said. "This kind of system will be financed and constructed on movies and advertising."

For now, Time Warner is content to "finance all this activity just to let people limber up in this medium," he said, downplaying reports the company was forced to sharply reduce ad rates to keep marketers from bolting (AA, Sept. 26).

In a separate interview, Mr. Levin said marketers will eventually embrace new media because they are "always looking for a way to talk directly to the most likely consumer."

Asked whether he has been disappointed by the marketing industry's lukewarm support, he said "agencies have certainly been a little cautious. [But] I think people who understand marketing know why this is important."

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