A WELL-DISGUISED INFOMERCIAL DRAWS FIRE: IT’S PAY FOR PLAY ON CNBC

When CNBC began billing itself as “the leader in business news,” network executives probably weren’t thinking of Global Investors Report.

The syndicated show airs on Saturday afternoons and has all the trappings of a regular business show. Global Investors Report features interviews with executives of publicly traded companies, and is hosted by Michael Jackson, who has won seven Emmy Awards for his radio talk show in Los Angeles.

But Global Investors Report is not a typical CNBC show. Executives pay tens of thousands of dollars to appear on the program, and in exchange they get an opportunity to tout their companies to a national audience without facing tough questions from real CNBC reporters.

“What makes your Internet portal different, special, attractive?” was perhaps the most probing question Mr. Jackson asked the executives of My Web Inc.com., a New York Internet firm that appeared on Global Investors Report not long ago.

Viewers who watched to the end of the half-hour program learned that My Web paid $135,000 to Harvey Productions, the Santa Monica, Calif., company behind Global Investors Report. The disclosure was visible for a few seconds, in small print at the bottom of the screen.

Because Global Investors Report resembles CNBC’s own shows, marketing experts worry that viewers are being misled.

“This is obviously biased,” says Bernd Schmitt, a Columbia Business School professor. “If the viewer is confused and believes that this is real programming, CNBC runs the risk that viewers will believe it doesn’t do serious reporting.”

Global Investors Report also raises the question of how much responsibility business news outlets have for their viewers, many of whom have recently started playing the stock market.

A spokesman for the Securities and Exchange Commission says it frowns upon anything that might mislead investors. The SEC has begun cracking down on stock promoters on radio and the Internet.

In the case of Global Investors Report, Harvey Productions is complying with the law. Payments from My Web and other companies are disclosed, as is the fact that Harvey Productions owns stock in some of the companies that appear on Global Investors Report.

The most explicit disclosures, however, appear at the end of the program — when many viewers may have already tuned out.

The disclosures that air during the interviews are less specific: Several times, a message scrolls on the screen, saying that the program is “brought to you in part by the companies appearing on the show.”

‘sounds like code words’

“It sounds as though they use the code words that get them off the legal hook without really making it clear to the viewer,” says Samuel Hayes, a finance professor at Harvard Business School.

Mr. Hayes wonders whether CNBC, the nation’s most-watched financial news network, should be airing any shows that blur the line between financial news and promotion. “You would think they would have more care for their franchise,” he says.

CNBC rival CNNfn carries no such paid programming, although it airs for fewer hours a day.

Some CNBC insiders say they share Mr. Hayes’ concerns. Still, the network’s official stance is that Global Investors Report is obviously an infomercial.

“Any informed or sophisticated viewer who watched that would quickly realize that those are not hard-hitting journalistic questions being asked,” says a CNBC spokesman. “It’s a commercial.”

That’s not the way the show is portrayed, though, by the companies that appear.

“Americlean Inc. to be featured on CNBC financial talk show,” the Canadian recycling company announced in a press release prior to its chairman’s appearance on Investing in America, the former name of Global Investors Report.

“Alternative Entertainment’s… Ralph Amato to appear on CNBC’s Investing in America,” the company announced prior to its chief executive’s appearance on the show.

San Diego-based Alternative Entertainment operates strip clubs and provides content for adult websites. Between Nov. 5, the day the company put out the press release, and Nov. 9, the first trading day following Mr. Amato’s appearance, Alternative Entertainment’s stock soared 57% to $3.13 per share.

Trading volume also increased from 4,300 shares to 60,200 — a surge partially fueled by insider trading. A week earlier, Mr. Amato had filed to sell 30,000 shares.

My Web’s stock did not get the same lift from its appearance, perhaps because Internet stocks in general have fallen out of favor. The company officially changed its name from Asia Media Communications Ltd.in April. Last year, Asia Media had zero sales and $35,552 in losses.

Founded in 1985, Asia Media had a checkered history that included a failed bid to sell videos in the Far East, a botched merger with a vodka distributor, and a bankruptcy filing. It became an Internet company in February when it swapped 8.5 million shares of its stock for a 100% stake in a Malaysian company called TecnoChannel Technologies.

In its current incarnation, My Web operates portal sites and Internet service providers in Asia. Its strategy hinges on selling set-top boxes that link customers to the Web from their television sets.

In their interview with Mr. Jackson, My Web chairman Edward Tobin, president T.S. Wong and investor relations head Randy Slifka portrayed their company as a real up-and-comer.

“Our growth in China will be very significant,” said Mr. Tobin, who declined to answer questions for this article. “My Web promises to make Asia Media a leader in the on-line services industry.”

loser in hong kong

Bill Bass, an analyst with Internet consulting firm Forrester Research, says he has never heard of My Web or Asia Media. Still, he says television-based Internet access has already proven to be a “non-starter” in Asia. “It never took off in Hong Kong, and if it had potential anywhere, it was Hong Kong,” he says.

My Web’s executives also gushed about their corporate partners, citing their company’s close relationships with two well-known technology companies: Sun Microsystems and Philips Electronics.

“The strategic partners My Web has are extensive and very supportive — Philips and Sun Microsystems. What a team!” Mr. Slifka told Global Investors Report viewers.

My Web has licensed Sun software, and it does sell set-top boxes manufactured by Philips. However, officials at both Sun and Philips say that My Web’s claims of strategic partnerships are exaggerated.

Mr. Jackson, known as a guest host on CNN’s Larry King Live, sounds troubled when told that Sun and Philips have cast doubt upon My Web’s claims. “I must tell you that besides doing the show, I know truly very little about it,” he says, noting he is a hired hand, not the producer.

John Pierson, a lawyer for Harvey Productions, defends the show. “If there is potential (for) confusion,” says Mr. Pierson, “I think your rub needs to be with CNBC, not with us.”

Crain News Service