Infomercial producer Positive Response plans IPO; offering heads to market with a value of $7.5 million.

Positive Response Television, Inc. may well become the first stand-alone infomercial production company to go public.

Infomercials are lengthy audio or video segments that combine advertising with information.

The Sherman Oaks-based company plans to sell its first public offering of shares this month, which it valued at about $7.5 million.

According to David Savage, spokesman for the National Infomercial Marketing Association, only a handful of the 100 or so production companies in his group are publicly traded. These are either part of a larger corporation or are marketing companies that assume the hands-off role of executive producers in making infomercials.

Savage believes Positive Response would be the only stand-alone, publicly traded production company.

The 6-year-old firm reported revenues of just under $2.5 million in 1993 and net income of almost $1.3 million.

The company's registration statement (SB-2) with the Securities and Exchange Commission, filed on March 23, stated it intends to sell 1.15 million shares of its stock at an estimated $6.50 a share. Another 200,000 shares could be sold to the IPO's underwriter, Tustin-based investment bank Cruttenden & Co., at their discretion.

According to the SB-2 numbers, almost 3 million shares of common stock would be outstanding after the IPO offering.

Right now, about two-thirds of the company's stock is owned by Chairman and Chief Executive Michael Levey. His stake would be diluted to about 44 percent after the offering.

Proceeds from the IPO are slated to fund infomercial production over the next 12 months and finance the company's entry into direct marketing, with its telemarketers phoning customers to peddle follow-up sales or new sales.

Direct marketing involves the distribution, promotion and selling of products and services by directly linking buyers and telemarketers on a one-to-one basis. Examples of direct marketing include infomercials with 800 or 900 prefixed telephone numbers, advertising mailers, catalogues and home shopping television programs.

Since it was founded, Positive Response has produced 35 infomercials having a talk show format. All were filmed in front of live studio audiences and were hosted by CEO Levey, to achieve "brand name" recognition for the products being sold, explained the registration statement.

The infomercial business has been booming despite the U.S. recession. The trade association gauged that the industry posted an almost threefold jump in revenues from $350 million in 1988 to an estimated $900 million in 1993.

Positive Response picked up one of 12 NIMA awards, and one of six Direct Response Television Chart Topper Awards for infomercials it made in 1992. The first was awarded by the industry's trade organization, the latter by a noted industry report published by Tustin-based Jordan Whitney Inc.

About 500 infomercials contended for the Chart Topper award, said John Kogler, spokesman for Jordan Whitney Inc., which tracks and analyzes television direct response marketing. The awards, he noted, were given to companies that topped the industry in terms of nationwide airings and media budgets expended to buy air time -- noted measures of success in the infomercial industry.

"In direct response, if you don't get the desired response level, you don't buy more time," explained Kogler. "So when people are spending a lot of media dollars on a campaign, it's a good indicator that the campaign is successful."

To date, National Media Corp., a publicly traded direct marketing company, has been Positive Response's primary client, providing virtually all of the company's 1993 revenues through royalties ranging from 6-10 percent on gross sales of each advertised product - which range from toothpaste and car wax to a home memory course. The company's contract with Positive Response ended in March 1993.

Positive Response began to wean itself from its reliance on National Media in 1992, producing three infomercials on its own or through joint ventures with Transactional Media, Inc., a subsidiary of Waltham, Mass.-based TDX Corp., which produces infomercials and other television programming.

Positive Response's longer term goal is to become a multifaceted direct marketing company, according to its registration statement.

In January, it acquired the capability to directly buy half-hour blocks of time from cable television networks and broadcast stations to air its infomercials.

Positive Response is also developing its own "outbound telemarketing operation," which would allow it to contact buyers for repeat sales or the potential sale of related products, rather than just taking calls in response to the infomercials.