NATPE's woes reflect U.S. TV woes.

Whatever it was that hit NATPE struck with a big bang -- suddenly and unexpectedly. Sure, there were previous signs of discontent but they were mostly due to the changing economic environment and new business models affecting the local U.S. television industry. But no one, least of all NATPE management, was truly prepared for the punch from the studios that resulted in a split marker and, perhaps, the end of NATPE as we know it.

NATPE is a non-profit association created in 1963 by local U.S. TV station programmers. It opened first to domestic (U.S.) syndicators and later to international program distributors. Its non-profit status prevented NATPE from legally stockpiling mass amounts of cash for rainy days, so it's difficult to estimate how long the association could conceivably stay in business at its current rate of yearly expenditures.

The fact that some of NATPE's American board members opted to pull their distribution companies out of the annual market organized by the association, may indicate a lack of confidence in the management team. This goes against the general opinion that the man at NATPE's helm, TV executive Bruce Johansen, is a well-liked, highly-respected and competent individual, who worked in every phase of the industry and who improved NATPE in terms of membership, market participation, prestige and number of exhibitors. He achieved this by offering participants low rates for floor space, highly informative seminars, good forum workshops and top-level keynote speakers.

What is most damaging to the association, however, is the fact that the major U.S. domestic distribution companies not only pulled out of NATPE, but also set up a competing market in a hotel-suite format at the Venetian, one of NATPE's unofficial hotels during the Las Vegas conference. (One studio, Columbia, is at the Bellagio Hotel.) This process managed to save each studio from $100,000 to $1 million and could be interpreted perhaps, as their attempt to start a new association -- something that the industry isn't prepared for. Indeed, these companies have formed an informal committee that, for now, has dealt with the logistics of hotel coordination, and set up a kiosk at the Venetian where market participants can get a pass to access the guarded elevator in order to get to the exhibition floors.

The alternatives for NATPE seem to be limited. Specifically:

* NATPE must resign itself to a smaller international market.

* It has to consider an additional market in tune with domestic TV industry requirements.

* It has to consider venues besides the usual handful of cities and

* It has to think about reverting to the hotel-suite market format, which it pioneered but later rejected.

Indications that some of the aforementioned points are being discussed come from the report that NATPE first cancelled some 10,000-hotel rooms in New Orleans as well as the Convention Center for the 2003 and 2004 conferences. It is believed that the association was able to pull our of New Orleans commitments without incurring any penalties by citing the "force major" clause (e.g. the 9/11 terrorist attacks) in its contracts. Meanwhile, NATPE has formed a "task force" to make recommendations on NATPE's future, and it is clear from its composition that its task is domestic. During a press conference early last month, NATPE's officials left the 2004 event open, but reinstated the New Orleans venue for the January 20-23, 2003 market by securing the remaining 300,000 square feet of the West wing Convention Center space. But even this aspect is not completely clear. NATPE has reportedly re-opened contacts with New Orleans, but only "optioned" some 600 rooms at the New Orleans Hilton (their traditional headquarters during the market) adjoining the Convention Center, to which NATPE has already re-committed (the penalty to cancel is less than it would be to drop the rooms). In addition, NATPE has reportedly considered entering into a tentative agreement with the Venetian Hotel and its interconnected Sands Exposition Center to keep next year's conference in Las Vegas, thus bringing the Venetian into its camp. NATPE will make the final decision whether or not to commit after it sees the outcome of this year's conference. However, the Sands is already committed to other events for January and February 2003 and the next available date is March. If NATPE chooses to hold its event then, it will go against the MIP-TV market in April, thus opening another can of worms for U.S. international distributors. It's important to consider that the best possible market date for the domestic front to reach the stations is December (after November sweeps), and/or March for the advertisers (pre-upfronts).

In addition, some international distributors are grumbling that if NATPE's January date is indeed becoming a purely international event, why not hold it in Miami, Florida, a favorite location of Latin American and European TV executives, for its direct flights, warm weather and low costs.

Although no one could predict this state of affairs, VideoAge has been reporting telltale signs of problems at the association since 1998 -- reports that were nor very well received by NATPE management.

While domestic syndicators complained about NATPE's diminished role due to the changing nature of its business, NATPE management became more demanding, more aggressive and, in one case concerning VideoAge, plain arrogant. In its preoccupation with generating larger revenues, NATPE became more self-serving and abandoned, to a degree, its true purpose -- serving the industry. An example: before pulling out, the major distributors reportedly gave NATPE another chance by asking for a 50 percent reduction on floor costs in order to be on the convention floor (which would represent a small savings for the studios), an offer that NATPE flatly refused.

Then, just as the domestic distributors dropped the bomb, NATPE management decided to limit the more crucial services of the trade press at the show, and tried to reduce its role in the syndication business by preventing the press from distributing publications at the official NATPE hotels. This decision was later rescinded, but not before ExtraExtra got its lawyers involved.

While everyone seemed to recognize that NATPE's future lay in global television, the association diverted its resources away from the international constituency and focused on saving the domestic sydicators. Consequently, cancellation orders poured in at NATPE headquarters in Santa Monica, California from overseas companies that were afraid the much-misunderstood domestic TV syndication problems would affect floor traffic as well as their investment in the market. It is possible that NATPE management doesn't view the international presence at the show as sufficiently big or rich enough to support the large infrastructure that it created, thus justifying its attempt to recover the domestic business as a live-or-die scenario.

Unfortunately, the true nature of local TV stations died with vertical and horizontal integration. When the U.S. government allowed conglomerates to acquire additional TV stations, it changed the nature of syndication. In the past, U.S. domestic distributors had to sell their new shows (first-run) off-net or through barter programs station by station in 220 markets, with the goal of "clearing" (reaching) 80 percent of America's TV households. The best place to sell the shows, in terms of cost-efficiency, was NATPE.

Today, syndicators have to call up to three TV station executives in order to clear or re-new their shows: not a good enough reason to spend some $4 million to go to NATPE with no other agenda. On top of that, the vertically-integrated companies that currently dominate the U.S. TV landscape develop, produce, syndicate and broadcast their shows internally, thus eliminating the service of other producer-syndicators.

Another strike against NATPE is that all first-run local TV shows are developed in October and sold (together with the renewals) just after November "sweeps" (ratings report). Therefore, at January's NATPE, TV stations don't have to make programming decisions.

But it's not that local TV stations don't have problems of their own. The whole broadcasting business is now in question with the FCC (the U.S. Federal communications authority) statement that American viewers will ultimately get TV programs via broadband, be it cable, DSL (phone lines) or satellite. With the mobile communications industry lobbying to take over the TV broadcasting frequencies, it is not hard to see the U.S. TV industry reflected in NATPE's woes.

RELATED ARTICLE: Leaving NATPE: The changing face of trade shows

KELLY THACHER

Whether trade show exhibitors are testing alternative events and marketing strategies or pulling out altogether, it's clear that NATPE is not alone in its woes. The influences behind these trends are just as varied as the industries represented at shows, with economic concerns and changed business models topping the list.

Almost every report on recent trade shows has cited the economy as the number one factor in decreased attendance. Not only has the high cost of exhibiting deterred companies from returning to their favorite trade shows, but individual industries themselves are not doing well or are facing new ways of doing business, and ultimately cannot justify shelling out the kind of money it takes to attend the shows.

"It depends largely on an industry-specific analysis," said Steven Hacker, president of the International Association of Exhibition Managers (IAEM), adding that the computer and broadcasting sectors, which are in economic distress, are the ones whose trade shows are suffering. According to David Audrain, IAEM's Chairman Elect, "There's no global effect that's hitting the trade show industry. Shows that are leaders in their field will continue to do well, while fringe shows [will suffer]." Audrain is also executive vice president of CONVEXX, a show management company. He adds that their biggest show, SEMA (Specialty Engineering Marketing Association) in Las Vegas, saw only a slight decline in attendance of 11 or 12 percent, which reflects a cutback in the number of lower-level employees in attendance rather than entire companies pulling out.

Even with the stronger industries hanging on, it still appears that the trade show industry is struggling. "For every one that's up, several more are down," said Doug Fletcher, President of Convention Data Services, which works with NATPE to track their registration data. He explained that out of four of the shows his company recently worked with, one (a medical show) had record attendance, while the other three experienced a decline. Similarly, attendance at this year's Western Show (the premier cable market in Los Angeles) was down by 40 percent.

Consolidation has also been pinpointed as a big contributor to economic problems in the broadcasting and film industry. "Consolidation has helped to implode our business, along with the decrease in advertising," stated Bruce Johansen, President of NATPE.

According to industry officials, the terrorist attacks in the U.S. are a secondary, even a temporary contributor to trade show woes. "Any fear of travel as a result of 9/11 is transitory," said Hacker. A recent report on the computer trade show, Comdex, revealed that the Sept. 11 attacks had more of an effect on security than attendance, dictating new stricter measures on bags, briefcases and laptops on the showroom floor. The one exception seems to have been SEMA, whose organizers claimed that international attendance was down 45 percent due to travel fear.

The economy is the ultimate factor when companies decide whether or not to participate in trade shows. Some companies are simply outgrowing certain shows and want a fresh approach to marketing their products. For example, eBay Inc. created eBay University, a two-day selling seminar, and held offsite hotel space during Comdex. And after much ado about IBM's attendance at Comdex, they created a touring, five-city sales event that included Toronto, but had no booth at the show. Instead reports said IBM placed representatives at a booth operated by its software partners.

Nevertheless, there is confidence that the sun will once again shine on broadcasting trade shows. "As the economy rebounds, exhibitions are going to rebound as well, even before other businesses," assured Hacker. "That face to face opportunity is [invaluable], and if you have clients you've been meeting with for 10 or 15 years, you will get over the hurdles and find a way to meet with them."