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Record $1billion ad pact

Jun 10, 2002  •  Post A Comment

OMD USA has concluded the richest single advertising deal in the history of TV: a one-year cross-platform deal with The Walt Disney Co. worth in excess of $1 billion.
The precedent-setting, mega-agency-to-mega-media-company deal, which was first described by Electronic Media (May 6, 2002), runs the gamut of Disney properties, including broadcast, cable, the stations, syndication, radio, print and the Internet.
It encompasses the entities Disney owns outright and those it owns only partially. A major component of the deal is ABC Sports/ESPN. And while cable entities Lifetime Television and A&E Networks are also getting a share of the deal, at press time E! Entertainment Television, 34.4 percent owned by Disney, was not part of the deal.
The deal includes upfront, scatter and spot budget allocations.
In return for its massive influx of dollars, OMD paid cost-per-thousand rates that were 1 percent to 2 percent under the aggregate average 5 percent CPM increase that the ABC Network garnered in the recent upfront, according to one insider. On the cable side OMD is likely to have guaranteed CPMs at about 2 percent under the average CPMs for the ABC cable networks.
On the Disney side, the company saw its share of OMD money increase in the 10 percent to 15 percent range, one source said.
The dollar allocation is just under $500 million ($300 million in prime time) to ABC, about $150 million to ESPN and around $75 million to Lifetime, according to other insiders.
The remaining quarter-of-a-billion-plus dollars in the deal are being allocated throughout the other Disney/ABC properties. The ABC network portion of the deal includes a 160-unit buy in “Monday Night Football,” according to one of the insiders, as well as a massive presence for OMD clients in ABC’s upcoming big events, among them the Super Bowl, the Academy Awards and next year’s NBA playoffs.
For all three of these big events, OMD is already the largest buyer, and that was one impetus for the parties to do the deal.
One question that has puzzled many observers of the deal is why OMD found ABC, sagging badly in the ratings this past season, to be such a desirable partner.
“ABC prime time is less than one-third of the deal,” said one insider, pointing out that, prime-time performance aside, “they’re fine in early morning, they’re fine in daytime, they’re fine in late-night, they’re fine in sports. The deal encompasses a whole lot more than ABC prime time.”
OMD clients that viewers will see throughout the Disney empire during the one-year life of the deal include Pepsi Cola and the various other PepsiCo products, McDonald’s, Visa, Universal Pictures, Nissan, Hershey’s Chocolate and Gillette.
“People like to talk about clout,” one senior agency executive said, explaining the deal’s rationale. If an agency spends more than $1 billion with a single conglomerate but only $300 million on its broadcast network, its clout is measured by the network buy, because each of the conglomerate’s divisions operate as discrete entities, the executive said. But if the agency can aggregate the spend and deal with the conglomerate’s corporate level, “Bob Iger sits up and listens, Mel Karmazin sits up and listens.”
On the Disney/ABC side, there are two other cross-platform deals currently in the works, including one renewal, though neither is as big as the paradigm-shifting OMD deal.
On the OMD side, there still are other possible big deals to come, though none that will break the $1 billion barrier. Negotiations are under way, or have recently been held, between the agency and Viacom, AOL Time Warner, Vivendi Universal and Discovery Communications.
Viacom has rejected the OMD cross-platform offer, according to a senior CBS executive, but it has done a single CBS network deal with the agency. Viacom also has concluded one other large cross-platform deal, which was the renewal of an existing deal.
OMD’s talks with Vivendi Universal include USA Network’s eyebrow-raising offer to discount CPMs by 10 percent in return for doubling the dollar volume of the agency’s business.
At AOL Time Warner, the discussions include renewal of a current three-year Turner cable deal that is entering its final year. The existing Turner deal and the cable portion of the new Disney/ABC deal together will account for between 60 percent and 70 percent of all of OMD’s cable buys this upfront.
Neither OMD nor Disney/ABC would discuss their $1 billion deal, but it is understood that it was negotiated at the highest levels of both companies, with Dan Rank, OMD’s managing director for broadcast TV, and his boss, Joe Uva, OMD president and CEO, doing the heavy lifting for the agency.
Hands on at ABC, sources said, were Mike Shaw, president of ABC sales and marketing, and Ed Erhardt president of customer marketing and sales for ABC Sports/ESPN.