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Attention Seekers

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TiVo forces TV advertisers, networks to rethink strategy.

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NBC (GE) is returning to 1950s-style program sponsorships in an effort to deliver key audiences to advertisers, because millions of TV viewers use TiVo (TIVO) and other digital technology to skip the ads.

Liberty Mutual, a Boston-based property and casualty insurer, will sponsor a pair of two-hour movies to be broadcast under the banner of "Liberty Mutual Presents." This will remind geezers and fans of TV's golden era of programs such as Kraft Television Theater, Colgate Comedy Hour, Hallmark Hall of Fame and Dinah Shore Chevy Show.

The ubiquitous 30-second spot isn't dead, but Liberty Mutual's decision to become the primary sponsor of two made-for-TV movies linked to the company's promotion of individual responsibility may be The Next Big Thing in TV advertising.

"Liberty Mutual wants to create a deeper relationship with our consumers by creating a long-term emotional connection to our brand," says Steve Sullivan, a company spokesman. "By partnering with NBC, Liberty Mutual has the opportunity to become involved earlier in the creative process to support projects that align our brand message promoting personal responsibility."

The first movie, Kings, is expected to air in September. The second is likely to be shown early next year on NBC and sister network USA. Kings will center on the biblical story of David and underscore Liberty Mutual's advertising campaign, "Responsibility. What's your policy?"

TV sponsorships faded in the 1960s and 1970s because advertisers found it impossible to keep up with increasing production costs. Advertisers aren't seeking to become programmers or directors, but want to attach their name to a few shows or special events that reflect their corporate principles and meet their advertising goals.

Reviving sponsorships seems like a good fit as long as the networks can maintain their independence and plausibly state that they exercise final control over programming.

With DVRs forcing broadcasters and advertisers to rethink how best to reach an audience, the hope is that these types of sponsorships cut through.

An estimated 40% of the nation's 283.5 million viewers now have a TiVo or similar box. An online survey by IBM (IBM) found that 24% of respondents said they owned a DVR and at least 50% reported watching TV programming on replay.

Broadcasters argue that DVRs widen the potential audience for ads, because viewers are no longer limited to a specific time slot and can watch the shows at their convenience. Maybe. The IBM survey found that 33% of respondents reported watching more TV with a DVR, but that's not to say viewers are seeing more ads.

In fact, according to Entertainment Media Research's 2008 Digital Entertainment Survey, 46% of those who record TV shows at home skip the ads "all the time" and another 33% skip them "most of the time." That's 79% of the potential audience for TV ads. Another 15% said they skip ads "some of the time" and only 6% say they "rarely" or "never" skip the commercials.

Advertisers are reducing TV ad expenditures. In 2007, network TV ad spending declined 2% to $22.4 billion and spot ads fell 10.2% to $15.6 billion, industry figures show. Advertising on cable TV, which can reach targeted audiences, grew 6.5% to $17.8 billion last year.

Advertisers are looking for other ways to reach targeted audiences. Pre-roll -- spots at the beginning of Internet videos -- are becoming increasingly popular. Internet advertising surged 15.9% to $11.3 billion and surpassed radio for the first time. Radio advertising fell 3.5% to $10.7 billion.

The increasing ability of viewers to ignore TV ads has forced broadcasters to take a different tack: Product placement, making the advertised item part of the program and separate from the commercial breaks. Fox's (NWS) American Idol routinely includes shots of Coca-Cola (KO) cups and viewers are encouraged to vote with a Cingular Wireless phone. On 24, actor Kiefer Sutherland's character, Jack Bauer, has battled terrorists with the help of Sprint (S) phones, Apple (AAPL) computers and one show centered on the security features of Cisco (CSCO) routers.

Ford (F) has taken the trend to its logical conclusion by making its product the centerpiece of the updated version of Knight Rider. In the show, Michael Knight and his artificial intelligence-enabled car, KITT -- now a Ford Mustang Shelby GT500 -- chase villains traditional law enforcement agencies can't touch. Viewers are encouraged to log on to NBC's website and enter a contest to win Ford vehicles.

Making the advertised product part of the plot puts the ad beyond the reach of the fast-forward button, but raises a basic question: What's the limit? The short answer: No one knows, but it apparently hasn't been reached yet.

NBC's joint venture with Liberty Mutual may be part of the long-term response to technology like TiVo that allows viewers to skip traditional 30-second spots.

"This is a great example of what can be accomplished when we work with a client earlier in the creative process to develop a strong understanding of their marketing objectives and match them with the right creative opportunities," says Mike Pilot, president of NBC Universal Sales and Marketing.

Check out what Hoofy and Boo have to say regarding company branding.

No positions in stocks mentioned.
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