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CNN BUSINESS UNUSUAL

Is Technology Creating New Hurdles for Advertising Industry?

Aired June 2, 2002 - 15:00   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.


THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
WILLOW BAY, HOST: Ahead on BUSINESS UNUSUAL, is technology creating new hurdles for a battered industry?

The woman who brought some of the most memorable commercials to your television set. And corporate sponsors who came to grab soccer fans at the World Cup tournament. Why the rules of the game may have changed.

That's all ahead on BUSINESS UNUSUAL.

Hello and welcome to BUSINESS UNUSUAL. I'm Willow Bay.

Broadcast television is still reeling from the worst advertising recession in decades and fierce competition from cable. And now experts say the growing popularity of personal video recorders is a threat to the very business model that sustains the industry. Brands like Tivo and Replay TV may soon make the 30-second spot a thing of the past. Susan Lisovicz has the story.

(BEGIN VIDEOTAPE)

(BEGIN VIDEO CLIP, "FELICITY")

UNIDENTIFIED FEMALE: Did I tell you I got a new computer?

UNIDENTIFIED MALE: Oh, not an Imac, those things are so beautiful.

UNIDENTIFIED FEMALE: Actually, no.

(END VIDEO CLIP)

SUSAN LISOVICZ, CNNfn CORRESPONDENT (voice-over): "Felicity" wrote Apple Computer into an episode. "Survivor" features a variety of product tie-ins admitted to remote backdrop.

(BEGIN VIDEO CLIP)

UNIDENTIFIED FEMALE: Cheers. Love this job. You know, Lila (ph), you should come work for Revlon too.

(END VIDEO CLIP)

LISOVICZ: And "All My Children" will devote a four-month storyline to Revlon. The boundary between commercials and programming used to be merely as revered as that between church and state.

But now there are predictions that the 30-second spot may be an endangered species. Just ask Ian and Lora Burgess, who are hooked on their digital video recorder.

IAN BURGESS, TIVO USER: There's a lot of dollars spent that are being spent by commercial advertisers that I'm not getting, I guess. We don't see commercials anymore, ever.

LISOVICZ: Forrester Research says that three million DVR's will be sold by the end of year. Within five years, that number will mushroom to 45 million. And one of the great perks of a DVR, the ability to zap commercials.

UNIDENTIFIED MALE: Since the commercials are the main source of revenue for these networks and local stations, they stand to lose a lot of the advertising money that they're getting now as people don't watch the commercials.

LISOVICZ: So Madison Avenue has to really think outside of the box, because the very business model of broadcast television is under assault.

TBWA Worldwide prepared this for DVD for Nissan.

LAURIE COORS, CMO, TBWA WORLDWIDE: The future of advertising I think is there's going to be a very blurred line between what is entertainment and what is advertising. I think that we will learn to start to build relevant stories and interesting, entertaining stories around the brands that are in our lives.

LISOVICZ: The other half has featured several segments on products that are show sponsors, including Clorox and Hyundai. A consultant with the show says there's nothing misleading about it.

UNIDENTIFIED MALE: I think that most people watching television today are very sophisticated and understand that there is really an implied contract here. They get to watch this programming as viewers for -- essentially for nothing or next to nothing, and in exchange for that, part of the deal is they watch some advertising.

LISOVICZ (on camera): And as more and more viewers zap commercials, expect more advertising to be embedded in the story line. Even proponents say there is bound to be some abuse of the concept. Critics say it's just another good reason for viewers to turn their TV's off.

Susan Lisovicz, CNN Financial News, New York.

(END VIDEOTAPE)

BAY: Well, the news may not be entirely bad for advertisers in Tivo households. Tivo says portions of the Super Bowl were paused or replayed an average 44 times per Tivo household, mostly to view commercials. Most frequently replayed, the Pepsi commercials with Britney Spears and Bud Light's robot war, movie trailers for "Collateral Damage" and "Austin Powers," and a spot for Levis lightweight jeans.

Coming up next on BUSINESS UNUSUAL, an ad veteran looks back at her high-profile career, and looks ahead to the future of the industry.

And later, advertising and the World Cup. Why scoring with soccer fans could be a tough feat. We'll be right back. Stay with us.

(COMMERCIAL BREAK)

(BEGIN VIDEO CLIP, COMMERCIAL)

UNIDENTIFIED MALE (singing): Plop-plop, fizz-fizz (ph), oh, what a relief it is.

(END VIDEO CLIP)

BAY: With spots like that one, Mary Wells Lawrence led a creative advertising revolution in the 1960s and '70s and became the first woman to head an advertising firm, her own -- Wells, Rich, Greene.

Earlier, I sat down with Wells Lawrence, who recounts here rise to the top of the ad business and her ultimate decision to leave in her new book, "A Big Life in Advertising."

(BEGIN VIDEOTAPE)

MARY WELLS LAWRENCE, AUTHOR, "A BIG LIFE": When Wells, Rich, Greene disappeared, and it did after about 30 some years and it had become about a $1 billion company, and after we had made this deal with the French advertising agency and they, like most of the French, never came to see us, never came to do much about Wells, Rich, Greene, it disappeared. Slowly but surely, the clients left and it disappeared.

And I was very upset because even though I was no longer a part of it at the end, I kept reading about all these people who were the people who had caused the agency to fold. I never read about the people who caused it to be so wonderful. And I felt that they had become ghosts. You know, the incredible talent we had Wells, Rich, Greene was just a very glamorous, wonderful time, and they had made it glamorous and wonderful.

So I felt I couldn't just let them disappear like ghosts. And that I had to, you know, write the book, bring them back so that what people remembered about that agency was what it was all about. Great talent.

BAY: What made that agency and what is its legacy today?

WELLS LAWRENCE: Well, what probably made the -- there were two aspects of the agency that were revolutionary at the time, because we came out of a print era. We were the first agency that went into television with the idea that we could bring the theater to television advertising.

Until we appeared on the scene, to a great degree most television advertising was print that moved, and wonderful print. I mean, (UNINTELLIGIBLE) was doing superb print and it moved, but it wasn't the theater.

And I had a theater background, and it all seemed to me that if you could take the viewer and you could take them into the theater of advertising and give them an idea that they could feel, not just present it to them, but where they entered into the little movie and they could feel what product is, that they could sense it, that it would be a much more effective sale than just being presented to someone.

And our advertising was probably the first that really specialized in bringing the motion picture business to television advertising. And it was very successful. We had the fastest growth of any agency in history.

BAY: You were a powerful force in the advertising business in its golden era, in essence. How does that era compare to the contemporary one in advertising?

WELLS LAWRENCE: Well, it's temporarily gone. Temporarily, because of the size of business now. I mean, businesses -- it used to be that when advertising was a very glamorous era, most agencies were working with the top management of the companies they worked for. They were working for the CEO's and the presidents and the people around.

BAY: And in fact, you could call up a CEO of a company, your client, and pitch them an idea directly...

WELLS LAWRENCE: Absolutely.

BAY: And the reverse was also true.

WELLS LAWRENCE: Yes.

BAY: If they were in a crisis, for example, they would pick up the phone and speak to you directly. That doesn't happen very much anymore, does it?

WELLS LAWRENCE: Well, that's because in those days people knew that advertising worked. They knew that economically if they were very close to their advertising agencies and they were -- and that they would get a big idea they could run with, it would make a big difference bottom line.

And today they're looking at other resources. You know, they're so big that they're upon the 64th floor, advertising and marketing is down on 12. And they very rarely attend an advertising meeting.

They're looking for money as a resource to require other companies. But it will come back, because eventually all of that size has got to produce something, and all of it's got to produce something that people want, you know.

And I always use as an example that it's always astonishing to me to discover how many people don't care whether they get broadband. The people who are very caught up in broadband think it's, you know, the world of tomorrow. But I think first they have to persuade the country that that's true.

BAY: And in order to get -- dig ourselves out of the hole that we're now in, we need to sell that a little more?

WELLS LAWRENCE: Absolutely. Absolutely.

BAY: There's some rumbling that you're considering returning to Madison Avenue. Is that true?

WELLS LAWRENCE: Well, I've been asked to. I've been asked ...

BAY: By whom?

WELLS LAWRENCE: By a couple of agencies that are kind of dickering to see if I would like to come back. Not in a permanent basis, but as a consultant to kind of maybe jazz up the creative enthusiasm and some of the creative work that's being done. But I don't think I would do that. I think probably I'll get into some ancillary business, because now that I'm free to start a new life -- because my husband died -- and I'm free to move about, I think that I would like to get into a creative business, but I don't think maybe it will be advertising, something very close probably.

BAY: Well, why not go back? Why not pass along some of that extraordinary wisdom?

WELLS LAWRENCE: Well, I'm selfish, and I love to learn. And I love -- I like to keep adding to the experiences that I've had. You know, I'm an experienced collector, and I would like to have something that's similar, because I think the advertising business -- and also, by the way, right now, this is the time to go into advertising, because right now it's at an all-time flat low. But it's going to change. It's going to have to change, and the people who are really in to it now I think are going to come into, in a few years, there's going to be a whole resurgence of the glamour of advertising.

BAY: Is it a good business for women to be in?

WELLS LAWRENCE: Fabulous. Perfect.

BAY: Why?

WELLS LAWRENCE: Because men recognize that women do much of the buying, and they recognize women as consumers so that they have respect for their points of view about what they do in selling.

BAY: So why aren't there more women at top of the agency business?

WELLS LAWRENCE: Well, there aren't many women at the top of any business, and I think that's a whole big subject that I'm very intrigued with at the moment and may take on, may take on.

BAY: Well, keep us posted if you do.

WELLS LAWRENCE: OK.

BAY: Mary Wells Lawrence, thanks for joining us.

WELLS LAWRENCE: Thanks a lot.

(END VIDEOTAPE)

BAY: Still to come on BUSINESS UNUSUAL, this year's World Cup Soccer. Why the fiercest competition may be off the field.

And later, on the job. An 82-year-old horse trainer, keeping his career on the right track.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I would get up every morning before 4:30 in the morning. I'm busy here. My entire life based around horses.

(END VIDEO CLIP)

BAY: We'll be right back. Stay with us.

(COMMERCIAL BREAK)

BAY: The 17th World Cup began on Friday, kicking off a month- long championship soccer tournament. Co-host Nations Japan and South Korea are hoping the matches will score some points for their local economies, and corporate sponsors are hoping to win big too. But this year's tournament is a whole different ball game for advertisers. Jim Boulden has the story.

(BEGIN VIDEOTAPE)

JIM BOULDEN, CNNfn CORRESPONDENT (voice-over): It features some of the hottest footballers on the planet, playing their favorite sport in a cage while sporting Nike gear.

This Terry Gilliam-directed dark ad dubbed "the secret tournament" came out ahead of football's (UNINTELLIGIBLE) the World Cup. The one thing is, Nike is not an official sponsor of the month- long tournament, joining Pepsi and Sony in so-called ambushed marketing.

NEIL JONES, CARAT: People like Sony and Nike, people who are very good at guerrilla marketing, aren't actually event sponsors, but they've have got higher awareness amongst the public who perceives them as event sponsors, than people like Gillette.

(BEGIN VIDEO CLIP, COMMERCIAL)

UNIDENTIFIED MALE: We have discovered a serious condition. We call it, football-itis. (END VIDEO CLIP)

BOULDEN: Nike's bitter rival, Adidas, is the official sponsor, and the German firm is spending some $36 million so you don't forget it.

HERBERT HAINER, CHIEF EXECUTIVE OFFICER, ADIDAS: We are the soccer company in the world. This is our heritage. This is where we have the highest market shares. This is where we have the best knowledge, know-how, experience, and this is what we will defend. So therefore, the World Cup is of essential importance for us.

BOULDEN: Adidas joins Budweiser, Coca-Cola, Yahoo!, McDonald's, Phillips, Gillette and other global brands, which are each spending a rumored $30 million to be officials sponsors.

But some European companies aren't advertising during the matches played in Asia. That's because in Europe most matches are on before lunch so people would have to watch at their office or in the pub, where most ads will go unnoticed for all the noise. TV rights holders may not get the boost they need to get out of their massive ad slump.

UNIDENTIFIED MALE: So what you've seen is advertising dollars not chasing television ratings but looking for other ways to promote their association with the sport. So you've seen a huge increase, for example, in things like radio, drive-time radio, going to work in morning, people have got the radio tuned on in their cars.

BOULDEN: But 60 percent of supporters say they will only have access to the Internet during day games, so the biggest winner may be the Web. Official sponsor, Yahoo!, was looking for some four billion page views in June. It got 18 million hits during France (UNINTELLIGIBLE).

Jim Boulden, CNN, London.

(END VIDEOTAPE)

BAY: The time difference will play a role in this World Cup tournament, but game action and ads might reach more eyeballs in the U.S. thanks to an enterprising few. Seoul is 13 time zones away from New York City, but some bar owners there say they're keeping their establishments open all night so fans can watch the matches live.

And just ahead, why the biggest business story of late may not involve Enron. Colvin's view on trouble in the telecom sector.

And later, on the job with an octogenarian horse trainer.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: (UNINTELLIGIBLE) Candid Camera.

(END VIDEO CLIP)

BAY: BUSINESS UNUSUAL will be right back. Stay with us. (COMMERCIAL BREAK)

BAY: If someone were to ask you, what was the biggest story to shake the stock market in recent years, what would you say? The Enron scandal or maybe the bursting of the dot-com bubble. In this weeks' Colvin's View, "Fortune's" editorial director Geoffrey Colvin says if you said either one of those, you may need a better connection.

(BEGIN VIDEOTAPE)

GEOFFREY COLVIN, EDITORIAL DIRECTOR, FORTUNE: What was the biggest stock market story of the past few years?

I suspect if you asked 100 people, most of them would say the dot-com boom and bust. And a few others with shorter memories might say Enron or other fraud-related scandals. But those are not even close.

If this is what investors lost in Enron, then that is what investors lost in the dot-com boom and bust. And this is what investors lost in the telecom boom and bust. The decline in market values of AT&T, WorldCom, MCI, Lucent, Nortel, Global Crossing and the many other big players in the telecom sector -- $2.5 trillion of market value vaporized over the past couple of years. It's the biggest financial disaster of all time by any normal measure. So why don't more people know more about it?

Well, a few reasons, I think. The biggest one being that this industry is old, sprawling and almost incomprehensible to a lot of people. Just figuring out the phone bill isn't easy. Many people aren't sure who does what. Some 23 percent of Americans still think AT&T provides their local phone service, even though AT&T got out of that business 18 years ago. This is one tough industry to comprehend.

Well, the stock market story is a lot quieter now. We'll spend more time looking back. When we do, let's not forget the truth about what really happened in the biggest story of them all, in those years when the market went insane.

(END VIDEOTAPE)

BAY: If you'd like to learn more about Colvin's View on trouble in the telecom business check out his column, "Value Driven" in the June 10 issue of "Fortune" magazine and on the Web at Fortune.com.

And finally, in less than a week, a three-year-old colt named War Emblem could make history for trainer Bob Baffort (ph) at the Belmont Stakes. With the win, he'd become just the 12th horse in history to win the coveted Triple Crown. But while the Triple Crown is the ultimate and elusive goal of almost every horse trainer in the racing world, some trainers are content with just keeping their careers on track.

BUSINESS UNUSUAL paid a visit to Belmont Race track and went on the job with the oldest trainer there to find out how he stuck to the course for so many years. (BEGIN VIDEOTAPE)

ARTHUR WENDELL, HORSE TRAINER: I got involved with horses. I started riding at about eight years old. I got on a horse my first time and I fell in love with horses. I've been part of the race track officially, as an owner, since about 43 or 44 years ago. I've had some success with it. Had a lot of fun with it. And now the honor that it's given to me is that I'm the oldest trainer on the race track here.

Oh, cut out the stupidity. Will you?

I get down in the morning checking the horses. We've seen them spotting a problem before it developments. They're very delicate animals. They're very -- they seem strong; 95 percent of the problems come from the stress and strain on their legs. When they're just galloping or jogging, that's one thing, but when they're putting out the best that they can, very many accidents happen, and stresses in different parts of them.

This is my exercise boy, (UNINTELLIGIBLE) James. He's been with me for a lot of years. I started him when he was 12 years old. He came to the farm and we started educating him with horses.

I'm getting this horse ready for him and then he's going to get on him, going to go out to the training track and give him some light exercise today.

It's a wonderful, exciting game. The most exciting thing that you can believe is when you win a race, and I don't care at what level it is, it can be at the lowest level that there is, the excitement just flows from your soul.

(UNINTELLIGIBLE) got me through that I felt that this game was keeping me alive and it's extended my life, period. The fact that I get up every morning at four or 4:30 in the morning, I'm busy here. My entire life was based around horses. And my dear wife, feels a little -- getting a little tired of seeing me work to this degree, but I think it keeps me alive, it keeps me moving, and I recommend it to anybody that wants to stay alive and keep moving. This is the game.

Now fellows, keep the language clean. We're on candid camera.

About 25 years ago, I hurt my back. I couldn't do any riding. And may get back to it again, not that I'm going to be 83, I might get back to riding again.

(END VIDEOTAPE)

BAY: Arthur Wendell doesn't have a horse running in the Saturday's Belmont Stakes, but he plans on being in the stands. And maybe one day one of his own horses will be at starting line.

That is BUSINESS UNUSUAL.

Coming up next week... (BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: (UNINTELLIGIBLE) stay on, gentlemen, until you tee off.

(END VIDEO CLIP)

BAY: Why are these golfers spending three days and three nights in their cars in a Long Island parking lot for a chance to put in this year's U.S. Open golf course.

We'll take you out to the green for a look at the business of golf. That's next week on BUSINESS UNUSUAL.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: (UNINTELLIGIBLE) back in and come back on the 18th hole?

UNIDENTIFIED MALE: It's going to be a long round.

(END VIDEO CLIP)

BAY: We'd like to hear your questions and comments about the program, so drop us a line. Our e-mail address, once again, is businessunusual@cnn.com.

I'm Willow Bay. Thanks for joining us, and goodbye from Los Angeles.

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