1995 YEAR IN REVIEW: O.J. OVERSHADOWS MERGERS

TEN EVENTS THAT MADE NEWS: INTERNET BLOSSOMS, UNABOMBER GETS HIS WAY

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Unabomber gets published

The shadowy Unabomber, said to have killed three people, including advertising executive Thomas Mosser, over a 17-year span, issued an ultimatum to The Washington Post and The New York Times: publish his 35,000-word anti-technology manifesto, or he'll resume his terrorist campaign.

Penthouse Publisher Bob Guccione countered by offering to print the treatise and give him a regular column in the magazine.

The Unabomber did not take up Mr. Guccione's offer. Undaunted, Mr. Guccione took out a page ad in the Times (cost: $60,000) in the form of an open letter to the Unabomber. In it, he urged him to "put an end to all terrorist activities now and forever" and repeated his earlier offer.

But in September, The Washington Post, at the request of Attorney General Janet Reno and the FBI, published the manifesto, causing dismay among many in journalism.

Kmart's woes

It was a turbulent year for Kmart Corp. as the nation's No.*2 retailer attempted to reverse its troubled fortunes.

Kmart ended many long-term relationships, including its ties with 31-year Kmart veteran Joseph Antonini and its agency of 26 years, Ross Roy Communications, Bloomfield Hills, Mich.

After failing to fix the retailer's problems, Mr. Antonini was eased out as chairman, president and CEO. In January, Donald Perkins, former chairman-CEO at Jewel Cos., replaced Mr. Antonini as chairman. By March, Mr. Antonini surrendered the remainder of his Kmart duties.

Despite having no CEO at its helm, the retailer continued to search for an advertising agency to replace Ross Roy, which declined to participate in the $175 million account review. In April, Kmart named Campbell Mithun Esty, Minneapolis, as its new strategic partner.

Now under the reins of new CEO Floyd Hall, Kmart hopes to turn around its ailing operations and improve profits.

Media mergers

Bigger might not be better, but it was definitely more popular in the media business in 1995. The year was marked with major media-company deals, each one seemingly more stunning than its predecessors, as companies rushed to find strategic partners and strengthen their positions in a rapidly changing industry.

In April Seagram Co., led by CEO Edgar Bronfman Jr., purchased an 80% stake in MCA from Matsushita Electric Industrial Co. for $5.7 billion. This deal launched speculation about further Seagram deals, such as for a TV network like CBS-which ended up going to Westinghouse Co. in August for $5.5 billion.

That same week, Walt Disney Co. wowed the industry by announcing its intent to acquire Capital Cities/ABC in a deal worth $19 billion. In September, Time Warner said it would buy Turner Broadcasting System for $7.5 billion, creating a $40 billion media giant.

Perhaps overshadowed by these deals was the sale of computer magazine giant Ziff-Davis Publishing Co. in November for $2.1 billion to Japan's Softbank Co.

Paper price increases

It was a year of relentless paper increases for both lightweight coated paper used by magazines and the coarser newsprint used by newspapers.

For magazines, the price hikes came quarterly-an unprecedented frequency-and boosted the price nearly 50% on the year. For newsprint, where hikes began two years ago, it was almost more than newspapers could bear. The rising cost contributed to the demise of the New York edition of Newsday, the Evening Sun in Baltimore and afternoon papers in Milwaukee, Houston and Providence, R.I.

The big guessing game now is to figure out supply and demand for 1996. There is no new mill capacity coming on board in 1996, meaning there will be little relief on the supply side.

Tobacco vs. Washington

The tobacco industry, already under siege from lawyers, faced a new battleground in 1995 as President Clinton allowed Food & Drug Administration to propose it regulate tobacco advertising.

FDA's proposal, announced by the president as an effort to reduce underage smoking, attempts to replace most tobacco image advertising with simple b&w text-based ads and eliminate giveaways.

The tobacco companies contended regulation should remain with the Bureau of Alcohol, Tobacco & Firearms and the Federal Trade Commission, and sued to prevent FDA from acting. Ad groups also opposed the regulation, questioning the right of FDA to set specific advertising standards for what could and could not be shown in ads for a legal product.

FDA is due to issue its final rules early next year.

Internet growth

The Internet's World Wide Web arguably has grown faster than any other product or service in 1995. Estimates from January pegged the number of users at less than 3 million people. But in November, Nielsen Media Research and CommerceNet released a study concluding that more than 24 million people are surfing the Web. Other projections have run as high as 40 million.

Not only are consumers jumping on, but so are businesses. Today, a company is considered archaic if it's on the Web. Yahoo, an Internet search guide, now lists more than 30,000 companies in its business database.

TV talk show uproarHearst's big announcement

Publishing's biggest business bombshell came from Hearst Magazines. In late July, the company said it would upgrade its circulation by boosting magazine prices, raising ad rates and cutting rate bases an average of 10% on 13 of its 15 U.S. monthly magazines.

Some saw the Hearst move as a gutsy way to obtain more revenue per page while shifting more of the cost burden to readers. But since advertisers were not notified in advance of the move, the strategy became a public relations nightmare. Even Hearst executives who supported the general strategy now concede they might have done it differently.

As the year draws to a close, it is still hard to tell how deeply the plan will affect advertising in '96. Hearst has lost a good chunk of Philip Morris Cos. business, including virtually all Kraft Foods and a good chunk of cigarette ads.

But Hearst executives were insisting the falloff was minimal and November figures-the first month when the controversial plan went into effect-showed flagship titles Cosmoplitan, Redbook and Good Housekeeping with ad page gains of 9.2%, 1.3% and 15.8%, respectively.

Sports turmoil

1995 wasn't the best year to be a sponsor of a pro sports league.

The eight-month Major League Baseball players strike came to an end in March because of a federal judge's order. The owners and players remain without a deal. The labor woes effectively killed The Baseball Network, an integrated marketing joint venture created by ABC, NBC and MLB. Next season will begin with a revamped marketing department and new sponsors, True Value among them.

And then there's the National Football League, under siege on one side by Dallas Cowboys owner Jerry Jones, who is suing to decentralize the NFL's vaunted marketing operation, and on the other by an array of owners looking to relocate their teams to get better stadium deals.

O.J. Simpson trial

Jury verdicts to the contrary, media buyers knew all throughout 1995 that O.J. Simpson was guilty of murder: he "killed daytime TV," quipped Grey Advertising TV buying chief Jon Mandel.

Coverage of the double-murder trial-particularly on gavel-to-gavel cable TV networks CNN, Court TV and E! Entertainment Television-captivated the American public and significantly displaced TV viewing patterns, particularly during live trial coverage. The trial devastated ratings for the Big 3's traditional soap operas and game shows and syndicated daytime TV talk shows.

But O.J. also proved to be a marketing phenomenon. Early on in the trial, major marketers logos-including IBM and Sony-were spotted on computer and TV equipment loaned to Judge Lance Ito's courtroom for the trial.

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