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Integrated Deals Shrink in Size, Number

Apr 19, 2004  •  Post A Comment

The much-trumpeted advertising clout that was supposed to spring from media consolidation has yet to flex its muscles in the TV deal-making arena.
Two years ago, media agency OMD USA struck a groundbreaking, agencywide $1 billion integrated deal with The Walt Disney Co. for all its media divisions. Nowadays, such deals are nowhere to be found. Typical cross-platform deals are struck with individual clients in much smaller $10 million to $15 million agreements.
The question is what happened to the clout that was supposed to follow media consolidation? Starting in the late 1990s, major media conglomerates from Viacom and Disney to Time Warner said one-stop shopping for their diverse media properties would reap billions in advertising dollars-all at a premium price.
Each company formed a special unit to handle the multidivisional deals: Viacom Plus, Disney’s ABC Unlimited and Time Warner’s Global Marketing. Business has grown slowly, but there is little evidence these deals are on pace to become the prime advertising sales generators as hoped.
For example, Viacom Plus now pulls in some $600 million in annual sales, or 4 percent of the $16 billion in advertising sales for all of Viacom, according to executives close to the company. “So it’s a tiny percent of its entire revenue,” said one veteran cable advertising sales executive. Viacom Plus executives declined to comment for this story.
Other media sales groups are at similar or lower sales levels. ABC Unlimited, which represents all Walt Disney Co. properties, has inked deals worth $300 million to $350 million in annual sales, according to media executives. Fox Broadcasting, which now handles all integrated advertising sales for News Corp., pulls in somewhat less, about $100 million to $150 million a year, according to media executives. Time Warner’s Global Marketing group is also in that range.
“There has been an evolution, as one might expect, from doing megadeals to working with a select handful of clients,” said Joe Uva, president and CEO of OMD Worldwide. In 2003 OMD USA inked around three to six small to moderate-size integrated marketing deals.
Two years before, Mr. Uva was instrumental in pushing OMD USA into the $1 billion deal with Disney’s ABC Unlimited-which industry executives believed would be the harbinger of big-dollar advertising deals to come.
The OMD-ABC deal wasn’t renewed the following year since OMD’s clients’ needs were met for the 2003-04 TV season. A prime lure for OMD to do the billion-dollar deal was the Super Bowl, which ABC aired during the 2002-03 broadcast season. The media agency also wanted to buy into the NBA, which was starting a new TV contract with ESPN and ABC. OMD has major sports advertisers such as Nissan, Visa USA, Cingular Wireless, Pepsi, Universal Pictures and FedEx.
When the integrated sales groups started, they were pushing all their media properties to garner $100 million deals. But advertisers resisted. “Like buying clothes, they wanted you to buy the entire rack, the entire outfit-all their media. Advertisers want to pick and choose. The media deals are more strategic now,” said Ray Warren, executive managing director of OMD USA.
Curbed Enthusiasm
For some media conglomerates, the initial euphoria of major cross-media advertising deals has waned, and they have devoted less manpower to integrated media sales teams. The integrated sales group News Corp. One has been folded into Fox Broadcasting Co., and NBC Connect collapsed into NBC’s regular advertising sales division. However, with the NBC-Universal merger soon to close, many expect NBC to restart its integrated advertising/marketing group, which would also encompass deals for USA Networks, Universal Television and Universal Pictures.
Time Warner’s Global Marketing group has also experienced a slowdown, according to media executives. It is looking for a new chief executive after President Michael Kelly moved on several months ago to become president of interactive sales marketing for the AOL brand.
One major reason media conglomerates may have cut back is the time that goes into producing these ad deals. Unlike straightforward TV commercial buys, which can take a few days to execute, typical integrated media deals can take months, if not an entire year, to put together. Heavy work is involved in setting up special promotions and coordination with the individual media companies’ sales and programming divisions.
Big advertising sales revenues for integrated sales groups may look great, but advertising executives say the real key is in obtaining incremental advertising dollars. These are advertising dollars above and beyond what media companies’ individual divisions-broadcast network, cable network, syndication, TV stations, print, outdoor or Internet sales groups-would get from advertisers had they struck their own separate deals.
Bill Bund, senior VP of integrated sales for ABC Unlimited, wouldn’t discuss revenue details for his group but said 30 percent or more of the money is incremental dollars. “These deals are the new lifeblood of sales organizations. Our deals don’t cannibalize other Disney business,” Mr. Bund said. “They get a larger share of overall advertising dollars for The Walt Disney Co.”
Mr. Bund now says the sales group has done some 30 deals for the broadcast year so far-with a target of 15 more by season’s end. This is significantly up from the 10 to 12 deals a year it did just two years ago. Media agency executives said Viacom Plus has been on a similar sales pace over the past few years.
Viacom Plus and ABC Unlimited are in a neck-and-neck race to become the industry leader. Viacom pulls in some $600 million, with a major part of its overall take coming from an annual $300 million marketing partnership with Procter & Gamble-one of few recurring deals with an individual advertiser.
ABC Unlimited would rival if not exceed Viacom Plus should it add deals to its roster that were originally struck by Walt Disney corporate executives. Walt Disney Co. partners include McDonald’s ($100 million in advertising sales per year), Home Depot ($55 million), Visa USA ($45 million) and Nestle ($50 million). Currently, ABC Unlimited services these clients. OMD’s Mr. Uva sees the future as a mix of big and small deals. “There is a big interest on behalf of clients and agencies for idea-driven concepts that travel across multiple platforms with a media company. And then there is the basic, low-value deal-let’s bundle all of our spending for a discounted deal.”
Integrated advertising sales groups incorporating network, Internet, magazine and other advertising sales aren’t new. Virtually every cable network group, including Turner Broadcasting, Discovery Networks, Lifetime and others, has had them for years. But these groups’ goals are more modest than the bigger media companies.