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IS IT PRIME TIME AT THE MALL?

New innovators undeterred by past mall TV flops

By Nancy Cohen

Digital Advertising Network streams ads and news into 62 malls across Canada.

Though the history of in-mall television ventures is largely one of blank screens and bankruptcy, a new generation of entrepreneurs hopes to turn the page on that sorry past.

Plagued to varying degrees by mechanical glitches and programming dilemmas, the early players succumbed primarily to staggering costs and the inability to win advertiser support. The latest to founder is Skytron Corp., Irvine, Calif., which had installed its large, high-definition screens in 72 U.S. malls. In May it filed for Chapter 11 bankruptcy protection, joining predecessors Food Court Entertainment Network’s Café USA and Screenzone Media Networks in failing to deliver on a much-touted promise.

Undeterred by that dismal performance, the next generation of mall TV entrepreneurs is trying to learn from such mistakes, redesigning the concept from top to bottom and reviewing its business model, technology, content and sales approach. As rock star David Bowie reportedly said in a different context, “It’s not who does it first; it’s who does it second.”

Poor track record or no, developers are eager to tap into mall TV. Many view it as a potentially strong source of revenue and an important step in cultivating the property as a marketing medium. The Arlington, Va.-based Mills Corp. has operated its own network for years at its value megamalls.

“There’s an increasing need to look at the building itself as a money machine,” said Stanley L. Eichelbaum, SCMD, a retail entertainment consultant and president of Marketing Developments, Cincinnati. “Alternative income beyond rental is a major focus of the industry and is increasingly necessary because of the havoc in the retail world.”

Some question whether shoppers want to watch TV when they’re at the mall.

Pilot programs are in the offing for Westcor and Simon properties. North of the border, Cadillac Fairview and Ivanhoe Cambridge have bedecked their food courts with a system run by Montreal-based Digital Advertising Network that is now in 62 malls across Canada.

Though no standard for mall TV has yet emerged, one of the changes across the business involves fundamental structure. At one time startup ventures tried to go it alone, managing the system, content and sales by themselves. Now companies are outsourcing parts of the business or forming partnerships, redeploying existing talent and assets instead of building each component from scratch.

Westcor Partners’ pilot program — which will run exclusively at FlatIron Crossing, Broomfield, Colo., and is expected to launch by November — illustrates the point. It’s based on a three-way partnership between the mall; Digital Video Communications, Woburn, Mass., which develops hardware and software; and a Denver-area cable company that will handle content and ad sales.

Cable and broadcast companies, which experts say are increasingly interested in the mall TV business, bring a built-in sales force already selling billions of dollars of advertising a year, as well as the production capability to recycle and reformat existing programming and commercials. Their involvement could be the key to winning support for mall TV, said Susan Martinez, CMD, vice president of strategic partnerships at Phoenix-based Westcor, FlatIron’s owner and a wholly owned subsidiary of The Macerich Co.

“No one has done it successfully because they didn’t have the staffing necessary to make inroads with advertisers,” Martinez said. “Startup companies like Skytron had the concept, but no advertising relationships, which can take years to develop. They came in thinking they could sell to 150 retailers in the mall and be made in the shade. They didn’t realize that many retailers do their advertising nationally, or that many of the mom-and-pops don’t have the resources.”

Not everyone is confining their mall TV to the food court. The Mills Corp. has screens throughout its value megamalls.

By contrast, a cable provider could sell a mall TV spot “as an add-on to any media package already being sold,” said Bill Everett, Digital Video’s executive vice president of sales.

In another major business-model shift, mall TV vendors are partnering with developers, establishing revenue-sharing plans rather than serving simply as tenants.

“This business is so capital intensive [that] the deal doesn’t work if you’re paying thousands in base rent,” said Warren Stelman, president and CEO of Digital Advertising. “Some of the competition had no chance of surviving.”

For developers, the benefits go beyond garnering a share of potential proceeds. They seek to leverage relationships with advertisers as they build the mall into a multimedia marketing entity.

“Our pie-in-the-sky dream is to take the advertisers, once they’ve seen the success of advertising in the mall, to the next level,” said Westcor’s Martinez. She envisions a layered marketing program of displays and signage, sampling and demonstrations, live events and sponsorships.

Simon Property Group already promotes those kinds of in-mall marketing opportunities through its Simon Brand Ventures, but video has been the missing link. The Indianapolis-based company, whose 1999 deal to develop a private network with Turner Broadcasting System never materialized, aims to launch a test of mall TV by the beginning of next year.

Some companies, including Digital Advertising Network, advocate pictures without sound, arguing that shoppers find TV audio too noisy and intrusive.

The timing may now be better than ever, given recent advancements in the technology used to create and deliver the programming. Digital, satellite, Internet and wireless systems all provide greater speed, flexibility, customization, control and quality than did the closed-circuit TV and videotape systems of yore, even as they shrink installation, production and operating costs. And computerized monitoring helps ensure that the units are working as intended.

“You can’t just roll out these things and not know that the bulbs have blown,” said Allan Safran, COO of Digital Advertising, which has alarms in place to signal the need for remote or on-site maintenance.

The displays themselves are a far cry from the multiscreen video walls or the clunky TV sets that once were suspended from food court ceilings. Large-format, flat and ultrathin screens now offer razor-sharp, high-resolution images, without the problems of multidirectional visibility, clarity and glare that afflicted early monitors, vendors say.

Audio, however, remains an issue. In the past, volume that was supposed to self-adjust to fluctuating food court noise levels often remained high enough to drive shoppers away. Some still question whether audio can ever coexist with a mall’s own music and ambience. The FlatIron project will test the food court units with and without sound, Martinez said. Displays elsewhere (in front of common area seating, for instance) will have sound. According to the equipment provider, they will be audible only to those close to the unit.

Others have decided that silence is golden. The Simon program is unlikely to include an audio component, said Drew Sheinman, president of Simon Brand Ventures.

The system’s mechanics are only one piece of the puzzle, however. Another is the programming itself. Early ventures peddled original or repackaged content similar to that of TV magazine shows, including celebrity interviews, how-to segments and music videos. Production costs were unfeasibly high, especially given the need to change content frequently to capture viewer interest. Seeking a less expensive approach, the now-defunct Screenzone featured trailers produced by the movie studios.

But none of the formulas gelled. All were poorly suited to the audience and the setting, developers said.

“Content in the past wasn’t integrated into the mall developers’ marketing plan,” said Simon’s Sheinman. “It may have been interesting, but it was not part of the mall experience, causing a disconnect for consumers and advertisers.”

Skytron’s screens went dark after the venture failed to attract advertisers.

Neither was there acknowledgment that patrons in a noisy food court, minding children, chatting with friends or even eating on their own, were unlikely to sit back and turn their full attention to a lengthy program.

“The food court is not a living room,” said Digital Advertising’s Safran. “The client’s there for 27 minutes, eating pizza. He doesn’t need the same music videos he sees at home, or half-hour interviews you can’t even hear.”

Since its debut in 1999, Digital Advertising’s programming solution has been to run advertising exclusively and without sound. To expand on the premise of offering quick-changing visual information, it is adding a news component. As of September, CTV (the Canadian news broadcaster) was to incorporate real-time transmissions of news headlines, weather and sports reports — presented vertically in a text-and-icon format on one-third of the display, like an oversize news crawl that has escaped the bottom of the TV screen.

“CTV adds something new to re-energize the audience,” said Nicole Vanderveeken, manager of national promotions and sponsorships at Toronto-based Cadillac Fairview, which has Digital Advertising installations in 30 centers. “It’s been a great service for us, but it has to stay fresh.”

The FlatIron pilot also draws inspiration from TV newscasts, but hews to the headline news model. One section of the screen will be dedicated to information about mall events, retailers and marketing, Martinez said, while other sections will feature weather, local traffic reports, stock updates and news customized for the mall by its cable company partner.

“We’re not creating a programming medium, but an advertising medium to provide information that helps people make a quick buying decision,” said Digital Video’s Everett.

Though Sheinman did not reveal details of the programming planned for the Simon network, which will be tested in food courts and possibly other locations, he made clear that the company would be mapping its own course.

“We’re developing our own custom original program or aggregating the best programming available” in an attempt to integrate it with the company’s other marketing efforts, he said. “The difference is in the developer planning the network around our strategy, rather than accepting a tenant — an outside entrepreneur — pitching it to us.”

Mills TV runs paid advertising, entertainment, information for shoppers and public service announcements.

However current programming plans evolve, mall TV needs an entirely new approach if it is to succeed, said Jack Myers, editor and publisher of the Jack Myers Report, a New York City-based daily newsletter for the media industry.

Mall TV “can’t replicate other media,” Myers said. “You must build a new business model based on what consumers are looking for in the food court — and that’s not necessarily sports scores or headlines or movie trailers. That material is available, but it’s not working. People thought, ‘Where there are people, there should be media,’ without giving thought to what people were doing there and what they needed to enhance the shopping experience.”

Assuming that the product itself can be fine-tuned in a way that is attractive and appropriate to the mall atmosphere and appealing to its viewers, the question remains: Will advertisers bite?

Their past resistance to mall TV set in motion a vicious cycle — not knowing if the new, unproven medium would work, they didn’t support it, so it didn’t work. “Advertisers still don’t know their [return on investment], how influential it has been, how effective it is,” said Brad Adgate, senior vice president and corporate research director at Horizon Media, a New York City media buying firm. “It’s a catch-22.”

Advertisers are increasingly seeking new kinds of media, however, both for the high impact of novelty and for cost-effectiveness. Out-of-home or place-based advertising has expanded in recent years from billboards to bathroom doors; from TV screens in airports to video in stores, office elevators and hotel lobbies; and from posters stuck on transit shelters to stickers branding pieces of fruit.

The placed-based sector “is growing faster than any other sector of advertising,” said Rob Segal, president of Segal Communications, a Toronto-based ad agency. “We’ve gotten heavily involved in events, street-level marketing, cinema advertising — all this guerrilla-type marketing that puts your products in front of your targeted demo right where they can buy them.”

The ability to influence a purchase at the last moment may be the most compelling reason for advertisers to jump aboard mall TV, Adgate said. “For advocates of ‘recency’ — the idea that advertising is most effective when the consumer is ready to buy — you can’t get any more recent than that.”

Segal, who has placed ads on the Digital Advertising system for Sony PlayStation, agrees. “The shopping mall is the point of purchase, and it’s a way to talk to consumers who are in a buying mode, with money in their hand. For our demo — guys 18 to 24 — it’s dead-on targeting.”

Though mall TV’s benefits to advertisers may seem obvious, its appeal to consumers remains unknown. The advent of technology that allows home TV viewers to skip over commercials has inspired advertisers to seek new media, but it also suggests that consumers increasingly resent advertising’s intrusion.

Vendors and developers argue, however, that in-mall advertising, done appropriately and informatively, is in a category of its own. “People hate TV commercials because they can’t buy anything when they’re sitting on the couch,” said Digital Video’s Everett.

By contrast, said Simon Brand Ventures’ Sheinman, consumers actually welcome in-mall ads that help them make purchasing decisions.

“The mall is the one venue that is by nature commercial, so consumers are more apt to listen and act on a brand communication,” he said. They’ve already made a commitment to commerce by choosing to visit the mall and are receptive to marketing messages, he notes, so long as they are “tasteful, contextual and relevant.”

Not everyone agrees with that proposition. “I challenge whether food court or other video can be an effective medium,” said marketing consultant Eichelbaum, suggesting that it undermines the developers’ goal of circulating people throughout the mall and conflicts with the environments they strive to create.

But even developers whose experience with mall TV has been flawed note that the concept is in its infancy, so they remain optimistic about its future.

“We’re very interested in working on moving this forward,” said Mark Klockner, vice president of new business development at Chicago-based General Growth Properties. Big, blank Skytron screens hang in 39 General Growth centers — their plugs were pulled even before the bankruptcy filing, on account of rent default. It is nevertheless “a sound concept,” Klockner said, “but you can only get there as a deep-pocketed company. Once the big media players come in, somebody’s gonna get it right.”

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