That day will mark the start of a drain of as much as $425 million in spending by the medium's largest advertiser, Federated Department Stores, and the end of the symbiotic relationship between homegrown department-store brands and the newspapers they've advertised in for more than a century.
$1.2 billion media plan
Federated's bevy of historic and beloved department-store brands will be officially reborn as Macy's, backed by the company's first national branding campaign from WPP Group's JWT and Publicis Groupe's Starcom, both Chicago. The company's $1.2 billion media plan is widely anticipated to favor national TV and magazines rather than its traditional mainstays of spot TV and newspapers.
All eyes are on Anne MacDonald, the newly appointed CMO at Cincinnati-based Federated and a former Citibank marketer. Ms. MacDonald is orchestrating what analysts expect to be a significant shift in media mix by the retail category's largest spender. She declined to comment.
The most dire prediction calls for as much as $425 million of the retailer's ROP newspaper advertising to disappear by 2008. More conservative estimates, such as the Deutsche Bank research report "Federated Impact May Be Greater Than Papers Expect," by Paul Ginocchio, forecast a still-stinging $200 million blow for the already ailing medium. Federated's annual newspaper spending currently totals $830 million.
Driven by customers' eyeballs
Federated spokesman Jim Sluzewski declined to discuss specifics of the campaign but said national magazine buys will be part of the media mix for the first time. "Newspapers will continue to be a very important medium," he said. "The fall launch is one point in time, and what happens longer term is something we are still going to be working on. Our media selection will be driven by where our customers' eyeballs are going."
And based on Federated's own spending patterns, that indicates less newsprint and more TV, radio and magazine ads, although the shift has been incremental so far.
"Trust me, we aren't jumping off the building yet," said Joycelyn Marek, VP-marketing at Hearst Corp.'s Houston Chronicle, a market that will see 15 Foley's stores switch to the Macy's banner next month, for a total of 17 in the Houston area.
'Close to the vest'
Ms. Marek said the paper has actually seen an increase in buys from Macy's, although she would not disclose figures. "Macy's is holding the new campaign very close to the vest," she added.
Abby Clark, VP-sales at The Columbus Dispatch, an independent newspaper that earns 17% of its ROP revenue from department-store brands, including seven local Macy's stores, said she's yet to see a reduction in Macy's ads. But it's hard to know what the third and fourth quarters hold.
"They don't give us buys by the quarter but by the month, and with updates every week, that can change drastically," Ms. Clark said. "I think it will be pretty big, but not so much that we'll have to lay off people. It's just more of the thing newspapers are seeing: large accounts having consolidated and bought each other up."
But Ms. Clark said despite Macy's national brand ambitions, newspapers remain relevant. "It's going to be risky. People go to newspapers and look for sales and shopping, and if they don't, they may not think to go to Macy's as often." Ms. Clark said Macy's experimented two years ago by pulling back on coupon offers in ROP ads. "They backed off quickly from that because it hurt them," she said.
First wave of pain
The first wave of pain will be more deeply felt by local TV and radio stations, according to Brian Kelly, exec VP at Initiative Media, which handled Macy's media buying for its southeast region for eight years before Starcom won the account.
"The Macy's money is new money for the [national TV] networks," Mr. Kelly said. "Suddenly they are going to be huge network players. Macy's is being aggregated into this juggernaut of a national brand."
Even though Mr. Kelly expects the money Macy's spends on newspapers to shift only incrementally, it's an inevitable shift nonetheless, especially as the chain tries to make loyal customers of younger readers who rarely read newspapers anymore.
John Kimball of the Newspaper Association of America said he expects a "powerful impact on newspapers" but said newspapers could mitigate it by convincing Macy's that "the department-store business is very local and that it's going to be imperative to make a strong local statement about the new brand."