*TiVo Packages Infomercials Into Set-Top Boxes

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In an ironic twist of new-media partnerships, personal video recording company TiVo said this week that it would begin distributing its set-top boxes with advertisements already stored on the hard drive.


Leading the pack of advertisers is direct response television marketer Guthy-Renker. Others taking part in the program include pay cable stations Starz-Encore and Showtime, the Professional Golfers' Association of America Tour and short-film Internet site IFilm.


TiVo, along with its chief competitor, ReplayTV, has become known for scaring advertisers by giving viewers the ability to tape any program and fast-forward through live commercials. Unlike ReplayTV, TiVo has not pushed this point in its marketing -- and this new revenue source is the reason.


The commercials will be available to set-top purchasers as soon as they install the box and navigate around the internal menu screens, and they can be erased when new programming is stored. According to the company, new commercials will be added with every 100,000 units produced.


The TiVo set-top boxes, manufactured by Phillips and Sony and sold at Circuit City retail outlets, will be shipped with three Guthy-Renker infomercials -- Dean Martin's celebrity roast videos, Tony Robbins' "Personal Power" program and the acne-fighting Proactiv Solution.


Guthy-Renker, Los Angeles, in particular seems to be compounding the irony of the situation because, like other DRTV companies, it relies heavily on the channel surfer to make a profit. Stacy Jolna, chief programming officer and vice president of advertising and media partnerships at TiVo, San Jose, CA, believes his company is giving the marketer a new virtual network on which to advertise.


"One of the things that struck us is that when TiVo consumers are navigating through the various screens of the TiVo service ... they are in essence channel surfing," Jolna said. "The reason why we are calling it TiVo Direct is because this is all about direct marketing to entertainment enthusiasts through this new medium."


Guthy-Renker also sees TiVo as a new way to reach the same audience, said Sally Lee, vice president of North American media at Guthy-Renker. She added that both companies are looking toward a long-term partnership.


"There is no doubt that with personal video recorders, people will tape shows and fast-forward through commercials," Lee said. "The general rate guys are really going to have to rethink the way they advertise, and we are already doing it. We are forward thinking because in direct response you really have to stay on top of new technologies and what is going on.


"Set-top boxes are the wave of the future, and the way people watch television is going to change," she added. "But we think of TiVo as just another medium, like a network -- another technology and another way to sell our products and stay on the cutting edge of TV viewership. People will still watch their favorite shows on network TV, and they will still watch it live and be able to see the commercials. But there will be a lot of shows that are taped and fast-forwarded through, and that's just the future of television."


Each show will be designated a separate 800 number so the companies can identify immediately which customers made purchases after seeing the long-form on TiVo.


Tracking will play a further role in the agreement, as Guthy-Renker will share an undisclosed portion of its profits with TiVo from sales made through shows watched on the set-top, Jolna said. Programming partners such as Encore-Starz, Showtime and IFilm will share a wider advertising package with TiVo, Jolna said.


"We will also share data in an aggregate fashion with Guthy-Renker," Jolna said. "What we tell them is what percentage of people who viewed it actually purchased it, and they will also know what percentage of the TiVo universe actually watched the Guthy-Renker material. The reason why that is compelling is because that allows them to experiment further with how they promote their content on the service."


Lee said Guthy-Renker chose the shows based on a typically male demographic matching that of the TiVo buyer and on the shows' entertainment value. The shows are not typical "yell and sell" infomercials, but instead use compelling content to push their respective products, Lee said.


"When you talk about targeting with the commercials, there are really two different animals here," Jolna said. "There is the consumer who is buying the Sony or Phillips receiver at retail, and the other is all the folks at home who belong to the family who will be engaging with the service. So we are still learning more about who our consumers are. They are not just necessarily dads who went out and bought the device, but the rest of the family who is enjoying having full control over their television service."


Jolna added that in the future, TiVo could work with partners such as Guthy-Renker to air shows on cable that could be specially marketed to people with TiVo. He said this could be done by airing the show and alerting TiVo customers to its airtime with a message that would allow them to check a box and automatically record it.


Meanwhile, in a move that is characteristic of the power of DRTV and what Jolna calls "programming viewers have never seen before," another TiVo advertiser, the PGA Tour, decided to use its half-hour slot to make what amounts to an infomercial.


"What the PGA did was make a half-hour of bloopers and fun segments -- including professional golfers shooting skeet with golf balls -- and at the end there is a merchandising opportunity to buy products," Jolna said. "That really represents the future of advertising on television -- the tight integration of branding, merchandising and programming in a compelling entertainment experience -- because, after all, shopping is a part of our entertainment experience."
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