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Time Warner chief Gerald Levin's plan for the Orlando Full Service Network has run into snags. TIME WARNER'S ORLANDO FIRE SALE COST OF ADMISSION FOR INTERACTIVE TRIAL DROPS TO $50,000 FOR SOME MARKETERS

By Published on .

Time Warner is scrambling to keep disgruntled advertisers from abandoning its much-maligned interactive TV test in Orlando.

The media giant in recent weeks has gone back to participating marketers, dropping the price of admission from $200,000 to $50,000 or less and offering rebates on production costs.

The moves are an attempt to quell an increasing dissatisfaction among participants in the test. Advertisers that signed on a year ago say Time Warner executives led them to believe that by now 4,000 subscriber homes in Orlando would be shopping in an auto mall, buying movies on demand and browsing through an electronic catalog.

Instead, the world is still waiting for a single Time Warner home to go interactive, and competing cable and phone companies-Bell Atlantic, Tele-Communications Inc., Viacom, U S West and others-are making tempting offers.

"They're proposing a revised approach to this thing and we're giving it some thought," said Dick Hackenberg, head of the interactive team at Chiat/Day, Venice, Calif., agency for Time Warner participant Nissan Motor Corp. U.S.A. "They are definitely trying to make a more attractive proposition. They almost have to-there are many other opportunities out there."

A Time Inc. spokesman characterized the revamped pricing schedule as an "evolutionary process."

"We looked at the expenses involved and restructured it," based on what advertisers' role will be and what Time Warner will provide for them, he said. "We've always intended to be flexible."

While no advertiser is known to have pulled out of the test, several agency and advertiser executives say some form of compensation from Time Warner is necessary to keep them in the game.

"It's not worth it if the system is going to continually be late and it's going to cost the advertiser valuable money in changing creative until the system is done," said an agency executive with a client participating in the test.

Marketers known to be involved include the U.S. Postal Service, Chrysler Corp., General Motors Corp., Nissan, Procter & Gamble Co., Merrill Lynch & Co., McDonald's Corp. and Holiday Inn. Most say they have not paid Time Warner any fees upfront, but several say they have spent anywhere from $300,000 to $1 million to develop interactive applications.

Executives say Time Warner's revised pricing schedule varies from advertiser to advertiser, but hovers around $50,000 for research plus an additional $10,000 to $20,000 for "digitization"-converting video so it can be used in an interactive setting.

One Time Warner executive said the decision to lower the cost of entry is "a way to get some money from people who haven't paid anything."

The original $200,000 price tag was to have included access to research and participation in a pooled incentive fund to offer viewers free movies or discounts off their monthly cable bills if they agree to watch ads or receive unsolicited coupons over a set-top color printer being developed by Hewlett-Packard Co.

"In the beginning, it was the interactive vendors saying if you don't play with me, there's not going to be room for you. But now they're saying we need you to play; what do we have to do to make you want to play?" said another agency executive working with Time Warner. "There's a lot of flexibility going on. It's a flexibility both in terms of pricing and them helping you with the digital production."

Time Warner also has made efforts to consolidate its ad sales team for the inter- active test. The company hasn't replaced Karl Kuechenmeister, head of ad sales at Time Warner Interactive, who left the company earlier this summer. Mr. Kuechenmeister was responsible for signing several advertisers.

Recently, two Time Inc. Multimedia staffers, Marketing Director Kathryn Russell and Senior Project Director Jill Siegel, have been calling on advertisers, re-establishing contacts that had broken down after Mr. Kuechenmeister left. Curtis Vie-branz, president of Time Inc. Multimedia, also is overseeing advertiser relationships because of his unit's connection to the publishing group's ad clients; Time Warner Interactive, a separate arm, is known to be doing production work for several advertisers.

Mr. Viebranz couldn't be reached for comment.

Despite Time Warner's efforts, there's still no clear answer to when marketers will actually go interactive in Orlando. Agency and advertiser executives say they have received conflicting reports from Time Warner executives on just what services will be up, and when.

"You're talking about a very small number of subscribers on a very limited basis," said an executive with an agency that has more than one client participating in the trial. The executive confirmed that "the deals are being renegotiated and they are coming in at a lower cost. When you're dealing with an agency and you have one client coming in at one price, you can't have another client at a higher price."

Marketing executives who have met recently with Time Warner representatives say they were told that anywhere from five to 50 homes would be interactive by yearend.

A Full Service Network spokeswoman disputed that, saying the plan is still to ramp up to the full 4,000 homes by yearend.

The spokeswoman said initial offerings would include 50 to 100 movies on demand, games, catalog shopping from Spiegel, Ed-die Bauer, the Warner Bros. Studio Store and others, and an electronic post office. Other services, including automobile shopping, news on demand and home grocery shopping, will be up sometime next year, she said.

"We've been ready for months," said Rod DeVar, manager of interactive projects for the postal service.

Time Warner executives met with him recently, he said, to determine the postal service's readiness to go up on the system.

"They wanted to check to make sure we were ready to handle orders," Mr. DeVar said. "I thought that was pretty funny. They could call me up and I'll take it down on a plane. Five households? I think we can handle it. How many orders of stamps can we accept out of five households?"

While most agency and advertiser executives say they are committed to Time Warner for the long haul, they admit they're in a tight spot. And they want Time Warner to know they're angry.

"They should work out better arrangements with advertisers, especially knowing that problems could occur," one agency executive said. "You're talking about potentially ruining images if it doesn't work."

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