Johnny Carson loves to make jokes about K mart and its "Blue Light Specials." In fact, the phrase has become a standard gag line for every wannabe comedian in America.
But the really funny thing about in-store advertising is this: It works like gangbusters.Just ask Midvale-based Broadcast International Inc. The company's Instore Satellite Network now reaches 45 million shoppers, more people than The Wall Street Journal, Time and TV Guide combined. More than any radio network, more than "Cheers," "Designing Women" and ABC News With Peter Jennings. More than . . . well, you get the idea.
Next time you hear the immortal words "Attention, K mart shoppers!" don't snicker, stand at attention and salute.
Appropriately enough, Broadcast International's president and chief executive officer, Dwight H. Egan, first realized the potential for such point-of-purchase advertising in 1974 while shopping at his neighborhood K mart. Suddenly a "Blue Light Special" ad broke into the background music. A part-time advertising man himself, Egan didn't snicker. "I thought to myself, that's a pretty good idea they have."
Eleven years later, Egan and his new company, Broadcast International, launched with Merrill Osmond and Dennis Crockett, began marketing music/advertising cassette tapes to local stores interested in influencing shoppers at that critical moment before they pick a product up and put it in their shopping cart.
It quickly became evident, though, that tapes were not the wave of the future. They wore out, were hard to distribute, recorders broke down and busy in-store personnel couldn't be counted on to do it right.
Satellites were the answer, they decided, and in 1991 they are still the answer - only more so.
Now in its seventh year, Broadcast International is in full growth mode. In the past 18 months, the company has grown from 70 employees to 450, has acquired Bonneville Market Information Corp. (formerly Bonneville Telecommunications Co.) and Check Rite, and logged $16 million in revenues in 1990, a 140 percent increase over the previous year. Net 1990 earnings of $1.1 million were up 53 percent over the previous year.
Revenue projections for 1991 are for $32 million, said Richard T. Dixon, director of national advertising sales for Instore Satellite Network. Satellite installations are now in 49 of the 50 states. From one office at the end of 1989, Broadcast International now has more than 30 nationwide.
The acquisitions have also diversified BI beyond its core business of providing satellite-delivered, in-store music and advertising to supermarket and drugstore chains - Safeway, Payless Drug, Super Valu, Phar-Mor Drug, Fleming, Furr's, Lucky, Osco Drug and Sav-On Drug.
Bonneville Market Information Corp., acquired in April 1990, is a distributor of financial and commodity market quotes, data and news to more than 3,300 receiving sites. And Check Rite International provides check verification and recovery services to more than 40,000 retail locations.
"Our goal is to offer a full spectrum of cost-saving products and services via satellite to a growing number of network subscribers," said Egan.
Egan and Crockett were once musical directors for the Osmond family's concert tour, which included Merrill, who sold his interest in the company in 1987. They originally formed BI to produce radio programs aired weekly on the Mutual Broadcasting System and CBS networks.
But it was space-age marketing, not top 40 hits, that eventually moved the company into the big time. Now, the "radio" shows that BI beams into stores are being augmented by in-store satellite television broadcasts for a variety of employee training programs.
"Whether it's arranging a Thanksgiving fruit basket in a Safeway supermarket or demonstrating a chain saw at an Ernst Home Center, more and more stores are using satellite television for instant training of their personnel," said Dixon.
"Corporate communications and education for staff and management are just some of the developing applications at Instore Satellite Network - which is actually a series of some 30 independent and autonomous private broadcasting systems, which each of the store chains control."
In June 1987, BI agreed to sell 70 percent of the company - valued at $6.750 million - to AEA Investors Inc., a privately held New York investment firm whose membership constitutes a who's who of retired Fortune 500 execu-tives. These included Frank Stanton, former president of CBS (now chairman of Broadcast International); William R. Hewlett, co-founder of Hewlett-Packard; Henry A. Kissinger, former U.S. secretary of state; and many other former chief executives of the nation's largest companies.
According to a 1989 article in Fortune magazine titled "The Richest Little Club in the World," the directors of AEA "do more than add gloss" to the companies in which they invest. "They inject brains and experience. Broadcast International, a (Utah) communications company that beams radio advertising in supermarkets, can tune in the smarts" of some of the nation's brightest business minds.
Last December, BI went public with an offering of 2.03 million shares of common stock at $7.50 per share. The proceeds are being used to finance new customer satellite installations, to open additional offices of Check Rite, for working capital and for other purposes. Of the total shares, 895,000 were sold for the company's account and the remainder were sold for various selling shareholders.
Egan believes the future for satellite communications in general and Broadcast International in particular is limitless.
"By the end of this decade, most retail organizations will be communicating via satellite," he said. "Many substantial retailers, such as Wal Mart, K mart, American Stores and Super Valu are already investing in private satellite com-mun-i-cations.
" The communications departments of the largest chains have performed sophisticated analyses of fiber optics, leased lines and other alternatives. We do not believe major retailers would have committed themselves to long-term investments in satellite architectures if this were not the most cost-effective approach to corporate communications."
Egan said competitive pressures will ultimately force other retailers to adopt satellite technology and BI will be in a position to capitalize on the trend.
The recent acquisitions have made BI able to offer a broader range of services than its competitors, said Egan. "While our competitors have focused narrowly on in-store advertising, we have emerged as a full-fledged communications company. We approach the market armed with an entire arsenal of cost-saving and revenue-generating retail applications, of which in-store audio advertising is just one component."
For example, with BI's technology, he said, Check Rite can deliver check and credit verifications almost instantly to retailers.
"Satellite networks are fast becoming the preferred method of communications for the retail industry, and Broadcast International has built a reputation as a leader in installing and operating these systems," he said.
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(Chart 1)
Services for Merchants
Music
Check Authorization and Recovery
Credit Card Authorization
(Chart 2)
Facts
Established: 1985
Total Employees: 450
Projected 1991 Revenues; $32 million
Offices: 30 nationwide (Home Office - Midwale, Utah)
Broadcast International is in 49 states
(Chart 3)
Magazines
Wall Street Journal 2,030,000
Time 7,600,000
TV Guide 17,000,000
Radio
Mutual 22,200,000
Transtar 24,300,000
ABC Information 25,900,000
TV
ABC/Peter Jennings News 14,900,000
"Designing Women" 21,500,000
"Cheers" 25,893,000
Broadcast International
Combined Instore Satellite Network 45,000,000