In-Store TV: Friend or Foe?

On Sept. 21, nearly 400 of the nation’s largest TV advertisers traveled to a new media mecca — rural Bentonville, Ark. — for Wal-Mart Stores Inc.’s third annual festivities for selling ads before its upcoming season.

Like broadcast and cable networks, the world’s largest retailer now stages an upfront presentation to showcase its programming and technology prowess for its Wal-Mart TV Network, which runs in its 2,850 stores and warehouse clubs as well as an additional 565 Sam’s Clubs.

Wal-Mart is the biggest name attracting advertisers such as consumer goods makers Procter & Gamble and Unilever Corp. to in-store television programming arranged and managed by Premier Retail Networks, a 13-year-old company based in San Francisco, which claims to reach 200 million viewers every month. Wal-Mart accounts for 87%, or approximately $97 million, of the $112 million that PRN achieves in annual revenue, according to a report in Inc. magazine.

Such in-store advertising could draw dollars away from local cable operators and even national networks. But PRN chairman and CEO Charlie Nooney, who spent 15 years in sales and marketing at Disney Channel, said that’s not the case.

“We should not be perceived as a threat to cable, but a partner. Everything is becoming everything,’’ he said, referring to the blurring boundaries of media such as broadcasting, cable and the Internet.

But PRN — by the numbers — is not a big threat. Yet.

For one thing, those aren’t big bucks for advertisers like Procter & Gamble and Unilever. P&G in the first half of this year alone spent $1.3 billion on various forms of advertising, according to TNS Media Intelligence.

What’s more surprising is that cable networks like Fox News and The Weather Channel, which could lose dollars to in-store video networks, actually provide free programming to PRN. “It’s like VOD, it’s experimental, and we want to be everywhere,” said Landmark Communications Inc. CEO Decker Anstrom. Landmark owns The Weather Channel.

At Fox News, John Malkin, vice president of affiliate market and local ad sales, agreed. “PRN gives us tremendous, additional exposure and our relationship is growing,” he said.

Both Weather and Fox News give PRN access to the same news feeds that appear on their cable networks. Program lengths and ad placements vary depending on where they appear in various-sized television sets located throughout the stores.

Other channels, like premium networks Home Box Office and Showtime, are buying ads on the network. For example, HBO bought time in Best Buy and Circuit City stores to promote episodes of Deadwood, said PRN’s head of business development, Peter Cullen, also a Disney alum.

“We touch cable, giving them an opportunity to showcase their content. We are a partner rather than a competitor,” Cullen added.

For these entertainment networks and advertisers, Wal-Mart is only the tip of a growing iceberg. PRN programming now appears in 6,000 retail stores, including electronics outlets belonging to Best Buy and Circuit City; and supermarket chains such as Albertson’s, Pathmark and Shop-Rite.

For now, PRN is not pulling a significant amount of dollars away from cable, the Internet or other media. It generated $112 million in annual ad revenue in 2003, compared to $15.8 billion in total cable television ad revenue and $9.6 billion in ad revenue generated by Internet sites, according to PricewaterhouseCoopers and the Interactive Advertising Bureau.

It’s even just a dent in the amount of promotional dollars spent in stores. That totalled $15 billion last year, according to Veronis Suhler Stevenson Partners, a fund-management company that provides forecasts for all media.

And even PRN’s playing field is not growing that fast.

Veronis Suhler predicts that in-store ad spending will only grow 7% next year, compared to 16% for cable advertising and a whopping 32.5% for Internet advertising.

Most of those in-store promotional dollars are largely spent on traditional print displays — shelving, coupons and radio feeds. In-store television is a slowly growing medium.

PRN, too, is hardly the first outfit to try to place screens near cash registers — and to get consumers to pull products off shelves nearby as a result. Former Turner Broadcasting System Inc. chairman Ted Turner tried his hand at providing programming in grocery stores back in 1992 with his Checkout Channel, but the venture was “short-lived,” according to a corporate spokeswoman.

That may have been ineffective because consumers had already made their purchasing decisions by the time they got to the checkout lane.

But PRN has televisions sets at the checkout counter too, and has installed plasma-screen and high-definition sets throughout the stores, to carry longer programming in areas where consumers spend more time to make a high-ticket buying decision, like for a plasma TV. At checkout, its programming is shorter in length, given that the average wait in line is six minutes, according to PRN’s Nooney.

For now, PRN is the big kahuna in that space, although another well-capitalized competitor is rumored to be eyeing the turf, according to one Madison Avenue advertising executive who signed a confidentiality agreement and has seen its business plan. Coming off a year of 20% revenue growth, PRN projects another year of 20% growth for 2005, according to Nooney, who joined the company five years ago.

Last July, consumer-electronics maker Thomson acquired PRN for $285 million, giving the once privately held company a bigger sandbox in which to play. Thomson’s Services Division, of which PRN will become a part, now creates software for broadcast post-production, content preparation and digital management systems.

PRN’s Nooney said the acquisition by Thomson will enable his in-store networks to expand to Europe and Asia.

Part of the attraction of a PRN network is that a customer like Wal-Mart and its advertisers can measure results. PRN employs Nielsen researchers to interview shoppers after they exit stores.

On average, 71% of shoppers recall seeing ads placed on the network, PRN says, based on its data from Nielsen Media Research. That kind of recall is three times higher than what any broadcast or cable network gets, according to PRN’s Nooney.

Cash registers also can tally actual product sales, using bar codes as customers ring up their purchases; and compare actual sales to the products being advertised on the network.

But PRN is not just a string of ads. The ads are surrounded by short-form programming, supplied for free from a bevy of cable networks including Oxygen, OLN, G4, Fox News and Weather.

For now, cable networks look at PRN as an ally, rather than a competitor.

For example, Fox began giving its news feed to Wal-Mart and Sam’s stores shortly after Sept. 11, 2001. “PRN’s research shows us that people are watching, and we actually get e-mails from customers who like what they’re seeing,” Malkin said.

But at least one skeptic is not impressed with PRN’s ability to stay the course. Jon Mandel, chairman of the media buying arm of the billion-dollar agency Grey Global Group, says his clients are not spurred to advertise on Wal-Mart TV because of the effectiveness of the in-store network. Instead, they are afraid of having their products pulled off Wal-Mart shelves if they don’t advertise on this vehicle. He also is afraid to name the clients involved, given the tension.

Shelves are better used to display products that can be picked up and sold than TV screens, which won’t be, Mandel said.