The already small universe of independent media agencies just shrank further. KSL Media -- a 32-year old shop that claimed 135 employees in New York, Los Angeles and Las Vegas -- has filed for Chapter 11 to "conduct an orderly wind-down" of operations.
The board was presented with information in June indicating that efforts to restructure "would likely not be successful," according to the filing Wednesday with the U.S. Bankruptcy Court for the Central District of California. The company has assets between $10 million and $50 million but liabilities north of $50 million, the filing says.
The company on its website has claimed $800 million in billings, but industry observers pegged the number much lower after KSL's client list shrank in recent times. Marketers on the agency roster include Petsmart, Toshiba and Sizzler, but KSL sustained a big loss earlier this year when Bacardi shifted its $130 million account from to WPP's Mindshare.
Along with the Bacardi loss, the sudden departure of CEO Hank Cohen last month set tongues wagging that all wasn't well at the firm. But there didn't appear to be a shutdown underway as recently as this week, when the agency was still posting to Twitter and Facebook.
Wednesday evening, however, emails to CMO Michael Oddi inquiring about the filing bounced back. Calls for comment were not returned.
Scale Necessary to Compete?
KSL inherited Interpublic as a parent when True North Communications, its previous owner, was acquired by Interpublic. KSL Media bought itself back from Interpublic in May 2003 in an all-cash deal negotiated in September 2001.
The shuttering of the shop after three decades in business comes as media-buying scale becomes an increasingly hot topic, particularly since the deal to merge two giant ad firms, Publicis Groupe and Omnicom Group. The size of the joint media buying operation -- which will overshadow competitors -- will be a key point that regulators will examine as they determine whether to approve the deal. Marketers, meanwhile, are pushing to integrate creative and media duties under a single agency roof and to take more marketing responsibilities, including media-buying, in-house.
There are few small to mid-size independent media agencies that haven't been gobbled up by bigger players. And there's only one very large indie media agency of scale that remains, Horizon Media.
Said Bill Koenigsberg, Horizon's CEO: "It's very hard to jump in and start a fully integrated media agency from scratch and it's hard for clients to go within someone without a minimum volume threshold. What scale provides you is intelligence in the marketplace." The shuttering of KSL doesn't have to be the death-knell for small media shops altogether, but surviving won't be easy and will require specialization, he said.
"I don't see this as the nail in the coffin that no smaller independent could ever exist," Mr. Koenigsberg said. "As storytelling and content become more important, there will be opportunities and it's about being smart, not small or big." He cited Omnicom Group's recent spinoff, Giant Spoon, overseen by former OMD U.S. CEO Alan Cohen, as well as Naked Communications.
There be a niche for clients that are getting totally lost in big entities, devoting maybe $15 million or $20 million a year to measured media, Mr. Koenigsberg added. "Smaller players in certain circumstances can survive and live in the ecoystem that bigger players are playing in," he said. "But it's tough."
Contributing: Catherine Wolf