Diageo creates net for $200M in TV ads

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Frozen out of American network TV for now, Diageo, the world's largest spirits concern, is cobbling together its own network of unwired TV stations to run $200 million in TV ads during each of the next five years. In exchange for lower prices, stations would get consistent revenue as they fight for dollars in one of the tightest ad markets since the Depression.

The move, announced at the Electronic Media/Advertising Age Upfront Television Advertising Summit last week (see story, P. 75), would raise the financial stakes for TV liquor advertising, which has seen only $118 million in measured media for cable and spot TV since Joseph E. Seagram & Sons broke the industry ban in 1996.

UP FOR DISCUSSION

At the same time, a Diageo spokesman said the company remains "in discussions" with major TV networks to carry its ads on network TV. While Diageo wouldn't identify the networks, it is said one network in the discussion is Viacom's CBS, but the network has denied that report.

Diageo's U.S. consortium of local cable systems, network affiliates and independent stations is expected to be ready by summer. It won't necessarily increase the geographic coverage of Diageo's advertising or the number of people seeing ads for brands like Smirnoff, Tanqueray and Captain Morgan, but it will boost frequency and allow the company to run more ads, cheaper.

"We are a very patient company," said Peter Isaia, director of advertising, media and media sponsorships at Diageo. "We're going to ... find the way to get the media companies to help drive the growth of our business." Diageo executives want network pricing, which is less expensive than spot. They said they knew of no other company that had constructed its own media network.

500 stations

Diageo ads already cover 85% of the country and run on more than 500 stations, said Jon Mandel, co-CEO of Grey Global Group's MediaCom Worldwide, which handles Diageo's media planning and buying. He said that number would remain fairly consistent with the new network, though it could fluctuate. Prices will vary by market. Mr. Mandel said that while Diageo would advertise outside its network, "The first people who will have dibs on the money are stations that have been with us over the last six years we've been running ads."

Diageo is ratcheting up its liquor spending, which totaled only $57.9 million on measured media last year, with $2.2 million allocated to TV, according to Taylor Nelson Sofres' CMR. Of the $365 million that hard-liquor marketers spent in measured media last year, just 1% went to TV.

Diageo's plan is that stations would charge lower rates but receive more money by selling more ads. Stations therefore would not have as many individual spot buys.

Larry Blaisus, senior VP-director of national broadcast for Interpublic Group of Cos.' Magna Global USA, New York, predicted Diageo would face challenges, especially in smaller markets. "You have fewer stations in those smaller markets, and therefore possibly fewer stations would might want to do it," he said.

Diageo launched the initiative after it failed to become the first spirits marketer since 1946 to advertise on network TV. General Electric Co.'s NBC in March balked on accepting Diageo's brand ads, amid criticism from groups like Mothers Against Drunk Driving. Millie Webb, MADD's national president, said MADD has no argument with the network unless its ads reach teens.

Interest in TV advertising from other spirits marketers is rising. Brown-Forman Corp. will run its first Southern Comfort TV ad by September. Havas Advertising's Arnold Worldwide, St. Louis, handles.

Distillers want the same access as brewers and vintners, which can run network ads, said Guy Smith, exec VP-external affairs and marketing public relations for Diageo in North America.

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