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November 13, 2018

Marketing: As Seen on TV

Cynthia Barnett | 8/1/2003
Infomercial producer Tara Borakos, the brain behind such successful direct-TV pitches as the Ab-Doer exerciser and the Flipfold shirt folder, was on a south Florida beach filming an exercise scene one winter when she decided to relocate her company from New Jersey to Fort Lauderdale.

The weather, Borakos says, was the primary reason she made the move. But there were other considerations, too: Florida's nonunion talent, its made-for-the-movies scenery and an abundance of sculpted rear ends -- important when hawking such products as the Bun & Thigh Max. "You can't shoot actors in New York without seeing a little cellulite," says Borakos. "Take a look around Florida -- even the waiters are gorgeous."

Those are just a few reasons why the infomercial industry in south Florida is growing faster than a Tae-Bo beat. According to this year's Film South Florida guide, 117 companies in the region offer infomercial-production services.

At Boca Raton-based Infoworx, the firm that brought the robotic vacuum Roomba to the small screen, CEO Ron Perlstein attributes the cluster to low production costs, the state's growing film industry and to behemoth Home Shopping Network. Based in St. Petersburg, HSN pioneered electronic retailing in 1977 and long ago left most other direct-TV companies in the dust, with sales of nearly $2 billion last year.

Infomercial Facts
The number of infomercials on TV has increased steadily since 1984 for two primary reasons: The growth of cable television and the federal government's decision to deregulate the airwaves and abandon rules limiting commercial minutes within a broadcast.

Some 63% of Americans watch some form of direct-TV advertising, translating to a customer base of 136.2 million, according to a 2002 study by Leisure Trends Group of Boulder, Colo. Still, direct-TV viewership had declined 11 percentage points since a previous study in 1996 because the exponential growth of TV channels means fewer people are watching any one channel.

A recent survey by the Electronic Retailing Association indicated that consumers have more trust in infomercials than they used to. But the industry group's comparisons aren't terribly impressive: Direct-TV viewers are more likely to trust infomercials than Congress, used-car salesmen or company executives.Still, HSN maintains close ties to infomercial entrepreneurs such as Perlstein and Borakos. Every week, the company's 200 buyers scour infomercial rankings to determine which products are sending consumers to the telephone. A successful product in the high-risk infomercial industry likely will play well on HSN, says Bob Rosenblatt, president of HSN's U.S. operations.

Together, infomercials and live shopping channels make TV the fastest-growing segment of the nation's $187-billion electronic retailing industry. Direct-response TV pulls in $107 billion annually, far outpacing online and radio direct sales, which generate about $40 billion each.

Barbara Tulipane, president and COO of the Electronic Retailing Association, expects the segment to continue to grow, especially as "As Seen on TV" in-store sales gain popularity. More and more, large retailers will monitor a new product's success first on infomercials and then on live-shopping channels before they place an order.

John Kogler with California-based Jordan Whitney Inc., publisher of the infomercial monitoring report JW Greensheet, says that confluence portends a bright future for the industry. "Our rule of thumb is that if you sell one unit on television, you'll sell 10 retail," he says. "These are products that lend themselves well to demonstration, and maybe not something you'd buy from a shelf at Wal-Mart unless you'd seen it work on TV."

But the infomercial business is not for the faint-hearted. Kogler estimates nine of every 10 infomercials fail. Among the 10% considered successful, very few will ever achieve the sales seen for blockbusters such as Bowflex, Showtime Rotisserie or Carleton Sheets -- last year's top three infomercials as ranked by JW Greensheet.

Choosing a producer
With that mix of risk and reward, inventors walk a minefield when they choose a production company. Some of the south Florida companies have been sued by inventors who complained they didn't live up to their promises of airtime. Some charge exorbitant upfront fees or offer tight-fisted licensing agreements that give the inventor only a tiny percentage of sales revenue.

Flipfold inventor Debbie Barker and her husband, Bradd, attended a Las Vegas convention for inventors sponsored by the retailing association. While there, they met Borakos, who was giving a seminar. The Barkers, of Fort Lauderdale (and yes, they have been able to quit their day jobs), have sold half a million of the $12.99 gadgets thanks to Borakos' "short-form" -- two-minute instead of 28-minute -- infomercial, which helped catapult Flipfold first to HSN, then onto the shelves of Wal-Mart, Target and other retailers.

The costs to produce infomercials vary as widely as the products, which range from kitchen gadgets like the Pasta Pot to the relatively new computer-instruction programs to the most popular category -- diet and exercise pitches. The electronic retailing group reports that a two-minute infomercial costs between $20,000 and $60,000 to produce and that a 28-minute infomercial may cost anywhere from $200,000 to $700,000.

At Infoworx, Perlstein touts his model of low upfront fees in exchange for a relatively small royalty, 2.5% of gross sales. "We concentrate on partnering with products we believe in, and clients we believe in, then we sort of get in bed with them and get our skin in the game," says Perlstein, whose company handles everything from production to telemarketing to distribution.

Both Perlstein and the industry itself must overcome a checkered history. Over the years, the industry has been the subject of ridicule as well as complaints about cheap or useless products. As for Perlstein, the former Philadelphia diamond merchant was convicted in a major diamond-fraud scheme there in 1986.

Perlstein says he has turned over a new leaf. And the industry's reputation is changing, in part because infomercials are becoming more sophisticated. Another sign of legitimization: The increasing number of large advertisers such as the Army and Mercedes-Benz seeking direct consumer responses to their TV ads by asking viewers to call or visit a website.

Consumers, too, are forcing the change, says Kogler. "Consumers have become very savvy about sending things back and back-charging their credit cards if it's not a good product, and that comes right back to the manufacturers," he says.

"But there are always going to be claims consumers have to be careful about. As far as I know, there is still not a magic pill out there to help you lose weight regardless of the number of calories you ingest."

Brought to You By...

Palm Beach County has become the center of a booming independent TV production industry that blurs the line between commercials and programming.

In the fall of 1993, Scott Woolley had just launched a video-production company and was noodling over how to break into television. Inspiration came in the magazine aisle of a bookstore, where he counted 11 magazines devoted to aviation. Thumbing through them, he saw a wealth of advertisements for everything from airports to propellers.

Soon, Woolley was calling on some of those same companies to buy into a half-hour, magazine-style commercial program called "Flight." At the same time, he was phoning cable companies to try and figure out how to get the program on the air. Woolley and his company, Five Star Productions of Delray Beach, went on to make 13 episodes of "Flight." The effort was imperfect, but it gave his new company wings.

Ten years later, Five Star has become the largest independent television production company in Florida. The company grossed more than $15 million last year. And it has racked up Emmys, Tellys, Addys and other awards for what Woolley calls "sponsor-embedded programming" -- an advertising genre that dates to 1948 and NBC's "Texaco Star Theater."

Advertisers pay to be part of Five Star's programs, which air on niche cable channels such as Oxygen or Outdoor Life Network. A pharmaceutical company, for example, may pay up to $500,000 for an informative program about a disease.

Another product: Faux-journalistic efforts such as "Business First," in which former Congressman Jack Kemp interviews corporate leaders one-on-one. Featured businesses pay some $15,000 for the privilege, and they largely control the content -- though Five Star's goal is to make its programs entertaining enough that viewers don't change the channel. (That's a tall order. On a recent "Business First," the president of the National Pork Board talked to Kemp about how "pork producers are revolutionizing the pork industry.")

An important element to the cachet of a series-TV show is a celebrity host. Five Star also touts "Today's Health" with Chris Evert. TV Interactive, whose studios are located in Florida Atlantic University's research park, boasts "Healthy Solutions" with Mariette Hartley. Health shows are a particularly lucrative business for the companies. More and more, pharmaceutical firms are turning to "issue marketing," paying for informational-style programs on illnesses such as menopause or transplant surgery that may or may not mention their drug products directly.

Nurturing the industry
The deregulation of the cable TV industry in 1984 and a loosening of rules related to TV advertising set the stage for the growth in companies like Five Star, which have proliferated nationally and clustered notably in Palm Beach County.

Film Commissioner Chuck Elderd counts 40 TV production companies in Palm Beach County that produce 85 of the series-TV programs. Their presence, he says, is almost single-handedly responsible for the leap in the county's film and TV industry revenue from $15 million a decade ago to $134.8 million this year. The largest, besides Five Star, are Teaching Learning Network in West Palm Beach and WJMK, Information Television and TV Interactive, all in Boca Raton. Founded in 1986, WJMK is the oldest of the Palm Beach County companies and helped seed the growth of the industry in the area. Several former WJMK employees have launched or now work for competing local companies.

Local government, too, has nurtured the industry. Elderd's organization has doled out more than $600,000 to help the firms build studios and expand in other ways. The series producers, Elderd says, provide a steadier economic base than Hollywood feature films: "You don't want to base the entire industry on permitted projects that shoot here on location and then go back home to some place else."

Content controversy
The companies also have brought a little unwanted notoriety. WJMK, for example, showed up in the New York Times earlier this year when retired CBS News anchor Walter Cronkite and CNN's Aaron Brown both backed out of hosting news-style shows whose content was guided by companies that paid to be featured. The anchors said they had been misled about the nature of the corporate-sponsored videos they were to host.

Meanwhile, production companies' quest to find respected doctors to host health programs has caused some heartburn in the medical community. Like the journalists in WJMK's case, some doctors don't realize the ultimate aim of the programming, says Karen Blum, assistant director of media relations at Johns Hopkins Medicine in Baltimore. Blum says Information Television (ITV), for example, aggressively recruits Hopkins doctors to host its award-winning "The Cutting Edge Medical Report." But only when the doctors read the fine print in ITV's pitch letter will they see that they'll be involved in "on-label therapeutic discussions" -- in other words, talking about the sponsoring company's drugs.

ITV President Ed Lerner insists that his company does not belong in a category with Five Star, WJMK and the others because ITV doesn't have to buy time on the cable channels where its programs air. "The content and the story that evolves in our case is a documentary and not a product," he says.

The combinations of paid and unpaid programming among the Palm Beach companies are as numerous as channels on a TV dial. But whether a show must pay a cable channel to be on the air is a capricious business. Just one example: ESPN pays the PGA to broadcast the men's golf tour. But the LPGA has to pay ESPN to air its tour.

Indeed, many of the companies have creative offshoots that distinguish them from their peers. ITV is cornering the children's genre with shows such as "Kids Healthworks," an American Academy of Pediatrics-sponsored program that Discovery Health channel pays to air, and a pilot called "Adventure Kids." TV Interactive, meanwhile, has found a niche recruiting people for drug trials for its pharmaceutical clients (www.patientinteraction.com).

At Syracuse University, Robert J. Thompson, founding director of the Center for the Study of Popular Television, says the line is drawn by "whether or not the program's content is determined by the people paying for the message." The most disturbing of the programs, he says, are those with biased content that viewers may not recognize as marketing. "This is not to say that there aren't some high-quality forms of this type of programming," Thompson says. "But nobody ought to confuse this for journalism or a documentary. It's a commercial."

Nails in the coffin
Still, Thompson says that these companies may well portend the future of television. The VCR, cable television and remote control -- enabling viewers to bypass ads -- all represent nails in the coffin of the spot TV commercial. Thompson says if ad-filtering technologies such as TiVo catch on broadly with consumers, "that's the last 25 nails." The solution for advertisers, he says, will be a return to the product-placement ads popular in the earliest days of television. Series-TV companies are ahead of the game with more sophisticated, if sneakier, forms of product placement than the Coca-Cola-red couch with Coke logo that sat so obviously this past season on the stage of Fox's "American Idol."

The big question, of course, is whether the companies' shows will be entertaining enough that viewers will want to watch them.

"The biggest losers will be mediocre programs that people now watch by accident," Thompson says. "I don't care how many Emmys a program-length commercial has received. I've yet to find anyone who planned to watch one."

Back at the Palm Beach County Film & Television Commission, Elderd predicts creative entrepreneurs like Lerner and Woolley will lead "an evolution of television."

"With them, it's always about entertainment," says Elderd. "No matter who's paying."

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