FCC Advances Airwave Auction

Powerless FCC continues to accept under the table bribes; all public airwaves are for sale to the highest bidder....

...Kenneth J. Martin loves the coin!

Credit Crisis May Curb Financing for Bidders But Agency Wants the Rules in Place

Federal regulators are pushing ahead with plans to put two valuable chunks of airwaves up for sale, despite market turmoil that could make it difficult for potential bidders to raise necessary financing.

Today, the Federal Communications Commission is expected to release draft rules for the re-auction of airwaves that would be used to create networks that allow fire, police and other emergency services to communicate more effectively. The idea, pushed in the wake of the Sept. 11, 2001 terrorist attacks, faltered earlier this year when the first effort to sell airwaves attracted no winning bids. Potential bidders were concerned about onerous conditions required of the winner. This time, the FCC is considering relaxing some of those conditions, including cutting the minimum bid to $750 million from $1.3 billion.

Separately, the FCC is considering an auction of airwaves that would require the winner to offer free wireless Internet service to consumers.

The turmoil in the credit markets raises a potential dilemma for regulators, who want to hold the two auctions as early as next spring. Smaller companies and start-ups could have problems raising financing and bids would likely be lower. In the case of the public safety airwaves, that could provide an opportunity for larger carriers such as AT&T Inc. and Verizon Communications Inc. to expand their already robust airwaves holdings relatively cheaply.

"If you're looking at start-ups and new entrants to come in this space, boy, that seems like a tall order to me under current finance conditions," says Michael Powell, a former FCC Chairman and current adviser to private-equity firm Providence Equity Partners.

There are different ways to measure an auction's success. In the two coming sales, the goal seems less about raising money than meeting various public needs. FCC Chairman Kevin Martin is trying to engineer both auctions to fulfill the desire by public-safety groups and consumers for more wireless broadband services.

Earlier this year, the FCC raised almost $20 billion in an airwaves auction, but public-interest groups complained that Verizon and AT&T won most of the airwaves. Smaller telecom companies groused that the rules were written to benefit larger carriers instead of potential competitors.

That could happen again, analysts say, if only because larger carriers may be the only ones who can raise enough financing to bid.

This week, influential House Democrats complained that the FCC is rushing to set rules for the public airwaves auction. Mr. Martin proposed a three-week deadline for public comment, an aggressive timetable but one that would ensure final rules would be set while he is still chairman.

It's not clear when the other airwaves, which would require the winner to offer free wireless Internet to consumers, might go on the block. Mr. Martin has championed the idea. The most likely bidder, M2Z Networks Inc., a start-up backed by Kleiner Perkins Caufield & Byers partner John Doerr, is lobbying for the FCC to set rules before the end of the year.

FCC officials say they can set rules for the auctions and delay them until lending conditions improve.

Some wireless-industry analysts question whether six or eight months would have much of an impact, however, given the amount of time it can take a smaller company or start-up to arrange financing.

"We've just seen the most radical transformation of the credit market in the last 80 years. That doesn't smooth itself out and we go back to the glory days in six months," says Roger Entner, Nielsen IAG's senior vice president of communications research.

Even Mr. Martin's critics give him credit for trying to tackle the issue of creating an interoperable wireless network for local police and fire departments. Congress set aside a large chunk of airwaves for first responders during a post 9-11 effort to improve communications, but never provided the billions needed to build a new network.

The FCC is essentially trying to tempt a commercial provider into building a network for public safety in exchange for the use of those valuable airwaves to sell high-speed wireless Internet services to consumers.

Agreement on how to do that has been elusive, however, and the effort has only become more complicated. "It's more obvious by the hour that there's less consensus about what we should do," said Robert McDowell, a Republican FCC commissioner.

By: Amy Schatz
Wall Street Journal; September 25, 2008

Unisys Chief to Step Down by Year End

New Leader Sought as Activist Investor Points to 'Missteps'

Unisys Corp., which is under attack by an activist investment firm, said Chief Executive Officer Joseph McGrath will step down by the end of the year as the company looks for a new leader.

The computer-services and hardware company said Mr. McGrath agreed with its board that "a change in leadership would best enable Unisys to move forward." The company said Mr. McGrath, 57 years old, wasn't available for comment.

MMI Investments LP, a New York investment firm that holds about 9.1% of Unisys stock, has been criticizing the company since last year for "the seemingly continuous stream of management, operational and financial missteps that have characterized recent performance." Earlier this year two MMI representatives were added to Unisys's board. The investment firm declined to comment on Mr. McGrath's planned departure.

Earlier this year, Unisys retained Goldman Sachs & Co. to investigate alternatives for maximizing shareholder value. Mr. McGrath said in July that he expected results of the investigation to be announced by the end of this year.

Unisys, based in Blue Bell, Pa. -- whose predecessor companies, Sperry Univac and Burroughs, hark back to the early era of computing -- performed well during the 1990s but failed to recover as other technology firms did after the dot-com bust earlier this decade. The company has faced declining sales for its proprietary computer systems as customers moved to standardized platforms.

Building on its existing computer-repair and consulting business, Unisys moved into the computer-services field with mixed results. Some of the biggest contracts it won, such as a check-processing deal in the U.K., turned into money losers that hurt results for years.

Mr. McGrath, a Xerox Corp. veteran who joined Unisys in 1999 and ran parts of its services organization, became chief executive in 2005, succeeding Lawrence Weinbach, the architect of the services strategy.

Unisys has had weak results since, with only three quarters of profitability amidst large restructuring charges and erosion in revenue. In 2007 it reported a loss of $79.1 million, including $66 million in restructuring charges, on revenue of $5.65 billion. Its first-half losses this year totaled $37.4 million.

By: William Bulkeley
Wall Street Journal; September 24, 2008

Candidates Pitch on Sports Networks

In a recent football matchup between the University of Minnesota and Ohio State, two other tough rivals are set to face each other: John McCain and Barack Obama.

The Gopher-Buckeye showdown is airing on Big Ten Network, where the two candidates are regular advertisers. With a main footprint that reaches seven political battleground states, Big Ten is one of several regional sports networks that have been attracting more political ads as the campaigns jockey to reach swing voters.

As the Boston Red Sox battle their baseball rivals at Fenway Park, presidential candidates John McCain and Barack Obama are battling each other in advertising on the New England Sports Network.

Fans of baseball's Philadelphia Phillies are seeing the Democratic and Republican nominees on Comcast SportsNet Philadelphia. On Fox Sports Florida, the Tampa Bay Rays' race to their first American League East pennant is being brought to you, in part, by Sens. Obama and McCain.

"It's a great concentration, a great way to buy men," says Brad Mont, president of political-ad-time buyer Media Ad Ventures Inc., which has placed ads for the McCain campaign. Although the ads on regional-sports networks rarely mention sports, they project "a local involvement, and some people will interpret that as supporting the team, which doesn't hurt," Mr. Mont says.

In the Big Ten, where home-team loyalty is practiced with cultlike fervor, that effect is multiplied by the electoral stakes. Since Sept. 1, Big Ten Network, which is available in 22 million homes within the Big Ten states, has been responsible for approximately 20% of the political ads Fox Sports Net says it has sold on more than a dozen regional sports networks.

"It's an attractive demographic -- in this case it's both a sports niche and a regional niche," says Charles Franklin, a professor of political science at the University of Wisconsin-Madison, and co-director of the new Big Ten Battleground Poll. Although the poll isn't directly connected with the network, its first batch of results was announced last week in a 90-minute program on the channel's air.

"It's a fortunate accident of political geography that so many of the eight states that happen to be in the Big Ten are competitive states in the election," Mr. Franklin says, adding "it's probably not that our football teams caused us to be competitive in politics." The seven states thought to be in contention are Ohio, Pennsylvania, Minnesota, Iowa, Michigan, Wisconsin, and Indiana; the exception is Sen. Obama's home state of Illinois.

The amounts the campaigns are spending on regional sports networks are still tiny when compared with the hundreds of millions of dollars being dedicated to TV advertising across the board. It's likely regional sports networks have pulled in well under $10 million in election ads, according to estimates from people familiar with their political sales.

Nevertheless, regional sports networks offer unusually ardent audiences. Their viewers usually watch live so they don't zap commercials. Most of them are men, a difficult demographic for any marketer to reach. And they may be swing voters, too. More viewers of Fox Sports Net, for instance, are "middle of the road" politically compared with most other cable networks, according to Mediamark Research & Intelligence.

"I've been doing this a long time, and this is the first time I've seen political spending really gravitate toward the regional sports network sector," says John McGuinness, senior vice president and general sales manager of the Mid-Atlantic Sports Network. Both campaigns have been buying ads during Washington Nationals and Baltimore Orioles games, Mr. McGuinness says, because his network's footprint includes the battleground state of Virginia.

Fox Sports Net, which owns 16 regional sports networks and handles national sales for 19 others, hasn't traditionally pursued political advertising, according to Kyle Sherman, who heads its ad sales. But this year, he specifically sought out political media buyers to offer multistate buys. The group even split its feed for Fox Sports Arizona to allow the campaigns to buy Arizona Diamondbacks ads that air only in New Mexico -- allowing both campaigns to sidestep Sen. McCain's home state of Arizona, which is solidly Republican.

Representatives of Sens. Obama and McCain declined to discuss the specifics of their ad strategies. "We are making sure voters see our ads in many creative ways and places," Obama campaign spokesman Nick Shapiro wrote in an email, saying they are only one part of a "voter outreach strategy" that includes online organizing and "neighbors talking to neighbors." McCain spokesman Tucker Bounds said, "We believe that our candidate's fanaticism for baseball, boxing, football, as a lifelong sports fan, positions us uniquely to court American voters that are also sports fans."

With baseball's regular season ending this weekend -- and baseball games heading to national TV -- some regional sports nets are looking to hockey and basketball to draw political dollars. Altitude Sports & Entertainment -- the network of Denver Nuggets and Colorado Avalanche owner Stan Kroenke -- is actively pursuing political ads now that Colorado is a battleground, says Tom Philand, head of sales and marketing: "We'd love to be able to tap into some of that spending."

By: Same Schechner
Wall Street Journal; September 24, 2008

New DuPont CEO Led Diversification Drive

High-Tech Research Helps Firm Build On Chemical Base

DuPont Co. named Ellen J. Kullman to be its new chief executive and president Tuesday, making her one of the few women to rise to the top of the chemical industry and putting her among the handful of women running the nation's biggest companies.

A 20-year DuPont veteran, Ms. Kullman, 52 years old, helped expand the company from a chemical producer into a high-tech research business that also ventures into areas like biofuels and solar technology. The switch has helped insulate DuPont from some of the pressures faced by basic chemical companies as prices for oil and natural gas have shot up and competition from producers in developing countries has increased.

Ellen Kullman backed DuPont's move into high-tech research.

Ms. Kullman, who was widely expected to become CEO, said she will continue the company's current strategy, which emphasizes developing useful products from scientific breakthroughs. "The science creates value," she said in an interview. "That's the exciting part."

Ms. Kullman will succeed Charles O. Holliday Jr., 60, who will continue as chairman, though she is expected to eventually take that title, too. She will become president and join the board Oct. 1, and she will take over as chief executive at the beginning of 2009, the company said.

One reason the board picked Ms. Kullman unanimously, Mr. Holliday said in an interview, is her ability to make the complex -- and sometimes obscure -- chemical business relevant and understandable to investors and customers.

In recent years Ms. Kullman has run most of DuPont's major business units. The company's first-half earnings grew 18% from a year earlier despite the slump in the automotive and housing industries, which are two of DuPont's major clients.

A native of Wilmington, Del., where DuPont was founded 206 years ago, Ms. Kullman said she has had a keen interest in science and "figuring out how things work" since she was a young girl. She received a mechanical engineering degree from Tufts University, where she is now a trustee, and a master's degree in management from Northwestern University. She is also a director of General Motors Corp.

In 1988, after working for General Electric Co., Ms. Kullman became a youth marketing manager in DuPont's medical imaging business, and then moved on to run the division that produces Kevlar, the material used in body armor.

Running DuPont will be an honor, she said. "I'm not sure being a woman adds or detracts from it. My managing style is unique to me, and I'm just really looking forward to continuing to drive our company's strategy."

By: Ana Campoy
Wall Street Journal; September 24, 2008

MySpace to Unveil New Music Features via a Joint Venture

Social-networking site MySpace on Thursday will introduce new music features that let users listen to free streaming audio, purchase song downloads and make playlists, the products of a joint venture with major record labels.

The moves make MySpace the latest challenger to Apple Inc.'s dominance in online music distribution. The new features will be accessible on MySpace user profile pages as well as the MySpace Music page.

The four major music companies, EMI Group Ltd., Warner Music Group Corp., Vivendi SA's Universal Music Group and Sony BMG Music Entertainment, a joint venture of Sony Corp. and Bertelsmann AG, have licensed their catalogs to MySpace and are equity partners in the venture. MySpace will also license content from Orchard Enterprises NY Inc.'s Orchard, an independent music distributor.

It remains to be seen if the initiative will help MySpace, which was purchased by News Corp. for $580 million in 2005, in its efforts to wring more revenue from its 120 million site visitors world-wide and gain an edge on rival Facebook Inc. Free audio streams will be supported through advertisements and MySpace will take a cut of downloads through a partnership with Amazon.com Inc.

About 35 million MySpace users routinely visit pages that feature music. Besides selling ads and song downloads, MySpace also plans to eventually link up with partners to sell artist merchandise and tickets to concerts. All of this will benefit big and small artists, said Amit Kapur, MySpace's chief operating officer. "We're not only going to be their home on the Web," he said. "We're going to be the place they make a living."

MySpace faces some stiff competition. Apple's iTunes store has roughly 80% of the market for music downloads, according to the company. There are also several companies that already offer free streaming music, including Imeem Inc., a San Francisco company that has 100 million monthly users.

The four initial sponsors of the MySpace Music site are McDonald's Corp., Sony Pictures, State Farm Mutual Automobile Insurance Co. and Toyota Motor Corp.. In an effort to keep ad rates higher than they historically have been, MySpace is limiting the number of slots for ads on the music site. A potential challenge in the advertising strategy: It is unclear whether users will actually pay attention to visual ads while they're listening to songs, said Russ Crupnick, an entertainment-industry analyst for NPD Group.

The record companies will get a share of revenue generated through advertising and other sources. The music industry has struggled in the digital age, as single-track download sales have failed to grow quickly enough to offset a precipitous decline in CD sales. A guaranteed stream of income from big advertisers is viewed as a potential step in the right direction.

MySpace executives are still looking for a chief executive to run the music venture, whose group ownership makes the job as much a diplomatic mission as an executive role. The company also has been recently looking to raise about $100 million to $200 million in equity financing for the music operation, people familiar with the matter say.

By: Amol Sharma
Wall Street Journal; September 25, 2008

Neiman Marcus Sees Bleak Holiday

Luxury-Goods Retailer Reports a Doubling of Its Quarterly Loss And Warns the Wealthy Are Cutting Back

Upscale retailer Neiman Marcus Inc. offered a bleak outlook for the holidays and said its quarterly loss more than doubled from a year earlier, signaling a further downturn in the U.S. luxury-goods market.

Neiman, which posted a $35.7 million loss for its fiscal quarter ended Aug. 2, warned that the American luxury market is likely to be hit hard by the recent financial crisis as wealthy and upper-middle-class consumers change their attitudes toward spending.
[Neiman Marcus Sees Bleak Holiday] Najlah Feanny for The Wall Street Journal

A Neiman Marcus at New Jersey's Garden State Plaza Mall on Wednesday

James Skinner, Neiman's chief financial officer, said that news of the financial turmoil is ubiquitous and that is negatively affecting the mood of consumers, who otherwise can still afford expensive clothes, shoes and jewelry. "The best customers never lose the ability to spend," Mr. Skinner added. But "there's an emotional impact" because of the coverage.

Carol Brodie, a branding adviser from Fairfield, Conn., said she splurges every fall on high-end coats and shoes. But this year, though she is doing well financially, she didn't shop. "I don't feel comfortable going all out," she said.

In a conference call, Neiman Marcus Group Chief Executive Burt Tansky said that "we anticipate that the months ahead will be difficult," including the crucial holiday season. He noted that many of the company's customers are heavily invested in the stock market.

Neiman's results came after analysts last week began reducing their full-year earnings forecasts for Saks Inc., which generates more than 20% of its annual sales at its flagship store in New York. Shares of Saks hit a 52-week low Wednesday in intraday trading before closing at $9. "Obviously, it's a very difficult time in the U.S.," said Saks CEO Steve Sadove Wednesday at a fashion-industry event in Milan.

As recently as the summer, some key categories of the U.S. luxury market were showing surprising resilience, including high-end jewelry, Swiss watches and products from such European brands as Hermès and Louis Vuitton.

But many luxury retailers saw sales start to weaken as the summer wore on. Nordstrom Inc., for example, cut its outlook for the second half in mid-August. Saks reported a 5.9% decline in August same-store sales and a $32 million loss for its fiscal quarter ended Aug. 2. Tiffany & Co., which sells everything from $200 silver pendants to $1 million-plus diamond rings, said same-store sales in the U.S. declined 4% in the quarter ended July 31.

Then came last week's meltdown on Wall Street, which industry executives say could dry up any lingering demand in the U.S. for luxury goods, including the last pockets of strength.

At the fashion shows under way in Milan this week, many European luxury-goods executives didn't hide their concern that affluent consumers will quit buying designer clothes, handbags and shoes. Francois Henri Pinault, chief executive of PPR SA, which owns Gucci, Bottega Veneta and Balenciaga, said he doesn't expect the U.S. market to recover until mid-2009.

"There will always be rich people, but it's the mindset" that drives their spending, Mr. Pinault said. He is particularly concerned about whether Asian consumers, a key market for the sector, will continue buying given the financial turmoil.

The financial crisis, coming only a month before many retailers put up their holiday-gift displays, couldn't come at a worse time. Neiman Marcus, for example, will unveil its annual holiday catalog Oct. 7. While most retailers were already expecting sales to slow and were keeping inventories lean, they are now bracing for an even tougher season.

Neiman, which is owned by private-equity funds TPG and Warburg Pincus, posted revenue of $4.6 billion in the fiscal year ended Aug. 2, up from $4.4 billion the previous year. But heavier discounting and free shipping eroded gross margins by 1.1 percentage points, the company said, and sales at stores open at least a year fell 1.4%. Results were helped by a 53-week fiscal year, which tacked on an additional $50 million of revenue.

Mr. Tansky said that high-end jewelry, in particular the most expensive pieces, as well as handbags, shoes and fragrances performed well in the quarter. Lower-priced items aimed at the "aspirational" or "occasional" shopper didn't sell as well. He also said the company's most loyal customers "haven't traded down."

Retailers that are heavily reliant on the New York City market will probably experience significant sales declines in coming months, analysts say, citing both the financial crisis and a likely dropoff in foreign tourists as the crisis spreads abroad.

"Saks and Tiffany are at the center of Wall Street's woes," because their businesses are so reliant on both New Yorkers and foreign tourists, said Goldman Sachs analyst Adrianne Shapira in an interview.

Tiffany's New York flagship accounts for 10% of the company's sales, Ms. Shapira said. On Friday, she reduced her 2008 earnings estimate for Saks three cents to 16 cents a share and cut Tiffany's guidance by a penny, to 31 cents a share.

Neiman's New York City outpost Bergdorf Goodman, which accounted for 12.6% of revenue in 2008, could also be hit hard.

By: Rachel Dodes
Wall Street Journal; September 25, 2008

Chrysler May Cut Daimler Tie, Seek Alliances

Chrysler LLC's majority owner has approached Daimler AG about taking over the German auto maker's remaining stake in Chrysler. The move is aimed at clearing the way for the U.S. firm to seek closer alliances with other car companies, say people familiar with the matter.

Daimler on Wednesday confirmed it is in talks with private-equity firm Cerberus Capital Management LP, signaling that the final unwinding of one of the business world's most celebrated mergers may be near. Daimler bought Chrysler in 1998 in a $36 billion "merger of equals" that sparked a flurry of automotive tie-ups, many of which proved unsuccessful.

Cerberus acquired 80.1% of Chrysler a year ago. Daimler's remaining 19.9% stake has emerged as a stumbling block for auto makers that could be interested in forming a global alliance with Chrysler, the people familiar with the matter said.

Any alliance would require Chrysler and a partner to exchange confidential information, such as product plans and sales projections, these people said. As a Chrysler shareholder, Daimler would have access to that information, a turnoff for potential partners, they said.

Cerberus may not have to pay Daimler for the stake. Cerberus took control of Chrysler in August 2007 in a complicated transaction in which Daimler essentially gave Chrysler to Cerberus. Cerberus agreed to invest $5 billion in Chrysler's auto operations and $1 billion in its finance arms.

Since then, Chrysler has continued to lose money and Daimler's earnings have been hurt by its share of Chrysler's losses. On Tuesday, Chrysler executives told dealers that the company had lost $400 million so far this year as sales have slid 24% in the first eight months. Daimler has written down most of the value of its Chrysler stake. In July, it valued it at €171 million (about $251 million), down from €1.4 billion a year ago.

It is unclear whether Chrysler has any potential partners prepared to engage in talks. Chrysler and Japan's Nissan Motor Co. have signed deals that call for Chrysler to assemble pickup trucks for Nissan and Nissan to make small cars for Chrysler. Those agreements led to speculation that the two could discuss a deeper partnership involving cross-shareholdings.

Nissan already has such an alliance with France's Renault SA, and Carlos Ghosn, who serves as chief executive of both of those companies and has said he is interested in adding a North American partner. In an interview this summer, Mr. Ghosn said Nissan hasn't had talks with Chrysler about expanding their relationship.

Chrysler confirmed the talks between Cerberus and Daimler but declined to further comment. News of the talks was reported by Manager Magazin, a German business publication.

The merger 10 years ago of what then was Daimler-Benz AG and Chrysler Corp. prompted other auto-industry deals, including General Motors Corp. linking with Fiat SpA, and Ford Motor Co. buying Jaguar and Land Rover -- alliances that were later unwound.

By: Edward Taylor and Neal Boudette
Wall Street Journal; September 25, 2008

Cisco to Buy Instant-Message Start-Up

Cisco Systems Inc., aiming to further its push into the online conferencing market, said it will acquire instant-messaging start-up Jabber Inc. for an undisclosed amount.

The San Jose, Calif., computer networking company is betting that business users will want the tools it is acquiring to work on, share and store files in a virtual "work room," where they can collaborate on projects and communicate over the Internet.

Cisco believes such tools, dubbed the "collaboration" market, can be a $34 billion industry. Other players in the market are Microsoft Corp. and International Business Machines Corp.

"Make no mistake, we are playing to win in the [collaboration space]," said John Chambers, Cisco's chief executive and chairman during the company's analyst day Tuesday.

Jabber adds instant-messaging and other communications technology to Cisco's fold. The Denver company's instant-messaging service operates on a range of devices, including mobile handsets and desktop computers.

Jabber's founders created technology used by Google Inc.'s Googletalk and Apple Inc.'s iChat instant-messaging applications.

By: Bobby White
Wall Street Journal; September 20, 2008

Comcast Submits Plans to Manage Broadband

Comcast Corp., the country's largest cable operator by subscribers, formally submitted plans to the Federal Communications Commission late Friday detailing how the company plans to manage its broadband network.

Rather than target specific types of bandwidth-intensive applications like peer-to-peer file sharing, the company will instead slow Internet speeds for its heaviest users at peak times when its network is congested. Comcast will do this by creating a second stream of traffic for recent heavy users that will have a lower priority when compared to its other customers.

The so-called protocol-agnostic approach is intended to comply with the FCC's network neutrality principles, which restrict Internet service providers like cable and VOIP phone companies from degrading traffic from particular companies. On Aug. 20, the FCC had given Comcast -- the country's second-largest provider of broadband connections after AT&T Inc. -- 30 days to outline its new management policies.

Comcast's filing comes after the company tested the new approach which includes colocation for three months in five cities to study its impact. The company plans to put the policy in effect over its entire footprint by the end of the year. Comcast says no customer complaints were lodged about the new method in its trial markets and less than 1% of customers were affected on a typical day.

Comcast's move may set a precedent for how other carriers manage the rapidly growing traffic on their own networks. Internet traffic is doubling every two years, and other big carriers like AT&T Inc. and Time Warner Inc.'s cable unit have also indicated that they will need to take steps to marshal the limited capacity on their networks.

Comcast's network-management techniques became a lightning rod for controversy last year after the company admitted it was throttling traffic from BitTorrent Inc., a popular file-sharing application.

By: Vishesh Kumar
Wall Street Journal; September 20, 2008

PepsiCo Seeks to Raise Stakes on Super Bowl Ads

Contest With $1 Million Prize for Consumers' Commercials Goes After Pregame Buzz and Anheuser-Busch's Top Ranking

When it comes to pumping out Super Bowl ads that score well with viewers, Anheuser-Busch is widely acknowledged to be the master. This year, PepsiCo has a new tactic to steal some of the brewer's limelight with new youth marketing techniques.

The snack-and-beverage company is offering $1 million to anyone who can create a Super Bowl commercial for its Doritos tortilla chip brand that trumps all other ads in viewer rankings during the gridiron matchup. It's part of an effort to raise the stakes on a contest the company ran two years ago.

PepsiCo is offering $1 million to anyone who can produce a Doritos ad good enough to top a viewer poll at the Super Bowl.

PepsiCo would, of course, love to win top honors, as measured by USA Today's Super Bowl Ad Meter, one of the more popular Super Bowl ad polls. But the company also has another motive with its contest. By dangling a $1 million prize, it hopes to dominate the months of pregame buzz, which many public-relations and ad executives say is far more valuable than winning the myriad Super Bowl ad polls.

This has become a critical way to help offset the high costs of youth marketing during the Super Bowl. Ad time for this season's game is selling for about $3 million for 30 seconds, up about 10% from last season.

Nationwide Mutual Insurance, for example, generated 3,584 news stories about its Super Bowl ad in 2007, which starred Kevin Federline, Britney Spears's ex-husband, working in a fast-food chain. The company estimates its push generated $23.3 million in free publicity. (Public-relations firms calculate these figures by assigning dollar values to every single media mention, whether it's a story in the Chicago Tribune or a piece on a local NBC affiliate.)

To top the polls, PepsiCo's consumer-generated ad would have to outperform the King of Beers, which has won the top spot for the past 10 years in a row, thanks in part to a highly detailed pregame ritual. Its formula involves multiple ad shoots and pregame focus groups around the country to measure viewers' minute-by-minute reactions to its spots.

"We're always impressed with the array of creative the Super Bowl brings, and we'll watch the game like we always do toasting with some of our fine beers and enjoying the show," says Bob Lachky, chief creative officer at Anheuser-Busch.

Doritos' marketers are trying to revive the excitement they created at the Super Bowl two seasons ago with a contest inviting consumers to submit their own 30-second ads for the famous triangular chip. It marked the first time marketers used consumer-generated ads at the big game, putting PepsiCo on the cutting edge of a new trend that shook up Madison Avenue by proving some ordinary folks, too, can create ads that can measure up to what highly paid creative executives produce.

The contest generated $36 million in free publicity for Doritos before and after the game, a Doritos executive told a conference in March 2007. Two spots, chosen from five finalists in an online consumer poll, aired during the game.

One ad, showing a love-struck driver crashing, crunching his face and bag of Doritos into a steering wheel at the sight of a pretty Doritos fan, scored 7.95 out of a possible 10 points in the poll and came in fourth behind three Anheuser ads.

The other, showing a supermarket cashier flirting with a Doritos-loving customer as she rang up bags of chips, scored 6.18.

Doritos didn't have as much luck with its contest for last season's Super Bowl. PepsiCo asked people to submit original music for a chance to have their tune aired during the game. But its winning video ended up lowest-ranked on the USA Today poll, scoring a 4.5.

The bigger winner: Budweiser with a spot featuring a Dalmatian training a Clydesdale to make the beer wagon team. The spot scored 8.73.

Doritos made a save by also showing another finalist ad from the previous year's hit contest; it scored 7.95, coming in fourth in the poll.

Now, Doritos' marketers face the challenge of finding an ad that will stand out at a time when consumer-generated advertising is no longer a hot trend.

"The newness that made it special in 2007 is gone -- now it's just another ad," says Dave Balter, chief executive of BzzAgent, a word-of-mouth media company based in Boston. "They are trying to manufacture buzz."

Ann Mukherjee, vice president of marketing for PepsiCo's Frito-Lay snack unit, says the company decided to offer the $1 million prize as an appropriate way to raise the stakes.

"Who knows?" she said when asked if she believes a consumer can beat out Anheuser-Busch. Doritos fans have shown themselves to be "amazing, talented individuals. The important thing is we're giving them the opportunity."

Even if none of five finalists topples Bud, each will still receive $25,000 and a trip to the Super Bowl.

The ad that wins the most votes in an online poll will be aired during the game. Voting will occur in January.

By: Betsy McKay and Suzanne Vranica
Wall Street Journal; September 24, 2008

Lilly to Disclose Payments to Doctors

Eli Lilly & Co. says it will begin disclosing how much money it paid individual doctors nationally for advice, speeches and other services.

The drug company's move, believed to be an industry first, comes as members of Congress push a disclosure bill in an effort to prevent such payments from improperly influencing medical decisions and to prevent pharmaceutical fraud .

Beginning next year, Eli Lilly will disclose payments of more than $500 to doctors for their roles as advisers and for speaking at educational seminars. In later years, the company will expand the types of payments disclosed to include such things as travel, entertainment and gifts.

Some have voiced concerns that doctors are influenced by these payments in their treatment decisions and that this in turn can drive up medical bills. Although many physicians believe free lunches or trips have no effect on their medical judgment, research has shown these types of payments can affect how people act.

"The ethical handwriting is on the wall. Disclosure is coming. States are pushing for it, and once a few states do, it's hard to imagine the federal government won't line up behind," said Arthur Caplan, director of the Center for Bioethics at the University of Pennsylvania in Philadelphia.

Eli Lilly was also early in the industry on publicly reporting its educational grants for medical conferences. John Lechleiter, president and chief executive of the company, said that made good business sense for the drug industry.

"We've learned that letting people see for themselves what we're doing is a good way to restore trust," Dr. Lechleiter said.

In the past two years, lawmakers from both chambers of Congress have introduced bills that would require drug and medical-device manufacturers to disclose any payments to doctors exceeding $25, but the industry chafed at the strict reporting threshold. Eli Lilly had announced earlier that it intended to comply with key aspects of the legislation once some lawmakers in the Senate agreed to a higher reporting threshold of $500.

Scores of trade groups representing doctors, such as the American Medical Association, voiced their support for the legislation once it included the higher, $500 threshold. In a letter to lawmakers, the groups said the disclosures would "enhance the medical profession's ability to provide oversight and strengthen our ability to serve as stewards of medicine."

Eli Lilly's disclosure of payments to doctors will begin in the second half of 2009, and will cover payments made in the first half of the year. The company doesn't plan to report payments from 2008 or earlier, noting that the legislation before Congress also did not contemplate such a look back. Gradually, the company plans to expand its registry to incorporate all payments that the Physician Payment Sunshine Act would require be made public.

Wall Street Journal; September 24, 2008

Getting Mobile Novices to Check Email

A Simple Gadget Lets Users 'Peek' at Their Messages

Are you a member of the "I-check-my-email-constantly-even-when-I-know-no-one-has-emailed-me" club? If so, your mobile email device is never far and you've found yourself wondering how other people can leave unread emails sitting in their inboxes all day. On the other hand, those seemingly unplugged people are likely puzzled by BlackBerry addicts, wondering what could possibly be so urgent that they need to know about it the second it happens.

This week, I tested Peek, a device that might bridge the gap between these two camps. It's made for those who don't intend to become consumed with mobile email, and don't need a combination phone, Internet, digital camera and email gadget. Yet from time to time, these people wish they had a better way to check emails without going home and turning on their computers.

Since I fit the constantly-checking-email description, I enlisted the help of someone who falls squarely into the category that Peek is targeting: my mother. Mom is constantly on the go, working on one project or another, and she doesn't have time to consistently check her email. On more than one occasion, I've had to call her to talk about emails I sent that she didn't yet read.

Stylish and Simple

Peek is a stylishly thin device that, to a mobile email novice, could pass for a BlackBerry. It receives and sends email, period. Peek doesn't have a Web browser, phone or built-in digital camera. It's sold for $100 at Target and GetPeek.com, and costs $20 monthly for contract-free service. Most email accounts work with this gadget, including Hotmail, Yahoo, Gmail and AOL, and up to three accounts can be set to work on each device.

Peek Inc., a New York company that was started by former Virgin Mobile USA employees, mailed a Peek to my mom in Pennsylvania, and she has been using it for about a week with positive results.

I, too, tested a Peek, but I was more interested in my mom's feedback since, prior to this test, she hadn't used a mobile email device and I use two different ones -- regularly. Overall, I'd suggest waiting until November to buy a Peek due to a handful of improvements that the company plans to add by then.

Winning Over a Novice

My mom got the hang of Peek almost instantly and found it both helpful and relatively easy to use. She liked its full keyboard and the way most of its keys lit up and were familiarly placed like those on a computer keyboard -- a feature I take for granted on my BlackBerry. Its price and stylish, thin look appealed to her, too. She tested an Aqua Blue Peek -- though the device also comes in Black Cherry and Charcoal Gray. I knew Mom was catching on when she casually sent a message from her Peek late one night using the subject line, "What's Up?"

My mom suggested a few improvements, and I agreed with all of them. The Peek can vibrate, chime and glow blue when new emails are received, but none of these indicators are particularly noticeable. For example, the chime sounds only once and neither my mom nor I could always hear it -- even at its loudest setting -- especially if it was in a purse. A blue indicator light on the Peek glows once every 10 seconds for 10 minutes after an email is received, but goes idle after that.

The font used on the Peek's screen could stand to be a little bigger. My mom found words typed in all capital letters were easier and faster to read than the regular font, but she thought most people wouldn't have too much trouble while using their glasses.

Peek Inc. says that by November, it will have added a louder chime, a constantly blinking indicator light and a larger font to the device. Also in November, people who purchase 12 months of service at once will get an extra month free.

Compared with my BlackBerry Curve, the Peek was thinner but I found its buttons and side scroll wheel a bit stiff. And Mom and I both found that the oft-used Space bar key was too tough to press down.

One Inbox, Three Accounts

The Peek's straightforward system uses one inbox view (in which up to three email accounts are combined), one menu and a side scroll wheel for selecting commands. And though my mom didn't seem to mind, the device's overall navigation system came off as a bit clumsy to me. For example, rather than selecting an email to read it, I had to select an email, and then choose "Open Email" from a menu list. On most other devices, this can be done with one step.

But some BlackBerry tricks are built into the Peek, such as touching "T" to automatically go to the top of an email or inbox; "B" to go to the bottom; or "N" to move to the next email without navigating back to the inbox list. Likewise, the space bar serves as a built-in Page Down button. And holding a letter down will capitalize it.

Photo attachments can be easily opened on the Peek, though attached documents from programs like Word and Excel won't open up.

Synching Contacts

A simple step lets users synchronize their email account's contact list with the Peek. My mom did this with an AOL account, and I did it with Hotmail, Gmail and .Mac accounts. Peek devices automatically check for email every two to five minutes, or if users can't wait two minutes, they can initiate a Send/Receive manually and see an up-to-date queue of emails.

Peeks each have eight megabytes of usable memory, which can hold about 5,000 emails. Once a device reaches capacity, an on-screen prompt asks permission to delete the 500 oldest emails. Peek Inc. says a full battery charge will last about five days if a device handles around 10 to 15 emails a day; power users who send and receive 200 to 300 emails a day will get about two days of use from a full charge.

When asked, my mom concluded that she would probably buy a Peek, but said she still wasn't sure that she had an urgent need to see email all that often. She also noted that Peek could become a Pandora's box of sorts for people who, as they use it more often, might want to get more out of it -- such as Google searches or other Web browsing.

Peek serves a purpose: It gives those who don't belong to the "I-check-my-email-constantly" club a way to "peek" in on their emails and not feel so unplugged from friends and family. That alone, is reason enough to buy my mom one of these devices.

By: Katherine Boehret
Wall Street Journal; September 24, 2008