Cable boxes add to media merger shocks

Cable World, Nov 13, 2000 by Mavis Scanlon

The rollout of advanced set-top cable boxes could upset a media world already dealing with the aftershocks of mergermania.

For example, the gargantuan media players would be up in arms if personal video recorder services built into boxes divert people from seeing the spots they've sold advertisers.

"We will have a real issue with that at Walt Disney if they start stripping out our content," said Ed Erhardt, president, advertising sales and customer marketing at ESPN/ABC Sports, one of the panelists at the eMediatainment World conference in New York last week.

Within a few years, most set-top boxes will include personal video recorder services, such as those from TiVo or Replay.

The owners of those services are downloading their own ads or implementing software upgrades that force the viewer to watch the ads, said panel moderator Michael Rogers, editor/GM of Newsweek .MSNBC.com. That could allow the ads sold by the television or cable network to be preempted.

That's just one more trouble spot on the horizon for ad agencies, which are already struggling to contend with a dramatically changed media landscape, said Erhardt. He predicted a sea change in the way advertisers are charged.

"Eyeballs won't matter as much," he said. "Ideas will matter, and results will matter even more."

Kay Koplovitz, CEO of-Working Woman-Network and the founder of USA Networks, agreed that eventually advertising will be judged by its effective results. That would signify a tremendous change in the relationship between advertising agency and client. Network television, radio and cable advertisers are typically charged per thousand viewers or listeners.

On the merger front, the growing costs of content and distribution -- plus the need for an Internet presence -- are some of the drivers behind media mergers, said Rogers.

The one thing that is almost a given is that most content -- no matter the distribution channel -- will be digital in about five years, he said.

The increasing convergence of the Internet, offline media, cable and entertainment worlds raises numerous questions related to content, distribution, business models and the integration of various business units.

One concern raised in the AOL Time Warner merger is whether the combined company will steer viewers on Time Warner's cable systems to AOL and Time Warner-owned properties.

"The early rollout of AOL-TV is worrisome to anyone not under the Time Warner umbrella," Rogers said.

Another issue is distribution. In general, it is still very difficult for smaller players "to get distribution in the world of cable and satellite," Koplovitz of Working-Woman said. "It's the bigger, the better," when it comes to content distribution.

Consider Viacom, for example, which has beefed up its cable, radio and TV holdings in a recent acquisition spree. Its purchase of BET catapults it over Time Warner to become the largest owner of ad-supported cable channels.

Its cable empire includes MTV, VH1, Nickelodeon, TV Land, Country Music Television, TNN and the movie network Showtime.

Outside of cable, its holdings include Paramount Pictures, TV and radio stations (its radio stations will grow again with its pending purchase of Infinity Broadcasting), the UPN television network and Blockbuster Video.