MADISON AVE. GOES HOLLYWOOD

Ad Agencies Manuever Closer to Owning Stakes in Talent Agencies

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LOS ANGELES (AdAge.com) -- The convergence of Madison Avenue and Hollywood is poised to take a giant leap forward as negotiations between the actors union and talent
agencies come closer to allowing ad agency holding companies to own stakes in talent agencies.

For years, ad agency holding companies have sought alliances with talent agencies. Creative Artists Agency has been rumored at times to have been in talks with WPP Group, Omnicom Group and Interpublic Group of Cos. In June 2000, Omnicom came close to an alliance with CAA; WPP Group Chief Executive Martin Sorrell has said the holding company has been interested in several entertainment groups. But so far, the closest ad agencies have come are small ventures or one-time program or movie deals for their clients.

Lifting the ban
Now the field appears to be widening. The Screen Actors Guild and the Association of Talent Agencies and National Association of Talent Representatives, which have long banned ad agencies, networks, movie studios or companies with a TV production division from making major investments in talent agencies, remain in negotiations to lift the ban.

SAG initially instituted the ban to avoid conflict of interest that could result in actors being restricted to working only for an ad agency's clients.

"Union negotiations could make it easier for ad agencies to have ownership and make [deals] more attractive for advertising agency acquisition candidates," said Phil Guarascio, chairman of PG Ventures, a media and marketing company, and former vice president of corporate advertising and marketing for General Motors Corp.

Mr. Guarascio has recently been a consultant for the William Morris Agency, helping it strike a deal to represent GM

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for its entertainment marketing initiatives.

Talent agency revenue has been hamstrung by the SAG contract. For instance, talent agencies are allowed to garner only a 10% fee from actors. However, on many other forms of business, including corporate clients, they are not restricted by the contract. This is why agencies have been rapidly pursuing corporate clients as well as expanding in other areas.

William Morris, for example, has a number of corporate clients including Tommy Hilfiger, Anheuser-Busch Cos., Compaq Computer Corp., Visa International and Nokia. Creative Artists Agency, which already counts Coca-Cola Co. as a client, has recently signed on Motorola and Boeing Co.

High-profile deals
As convergence gathers steam, high-profile deals continue to be inked. CAA brokered Coca-Cola's deal to become a tie-in partner with AOL Time Warner unit Warner Bros.' Harry Potter and the Sorcerer's Stone. OMD USA, a media unit of Omnicom, set a deal for product placement for its clients in UPN shows this season -- engineered by talent agency Endeavor, UPN's outside promotion and marketing agency.

In another example of the melding of product advertising and entertainment -- albeit one not brokered by a talent agency -- the WB in 1999 brought Coca-Cola into a summer series, Young Americans, as a title sponsor. Coke also got product placement in the form of a Coke vending machine appearing in the series. The Coca-Cola deal was done through Interpublic-owned Universal McCann's TV programming group.

For advertising agencies, there are several benefits in a share of a talent shop.

Owning Friends
"The investment opportunity [for ad agencies] isn't just investing in a company that gets a fee," Mr. Guarascio said. "You can basically invest in a company that owns content, and content is where the big money is. What you really want to do is own Friends or All in the Family."

The benefit for advertisers: stakes in hit TV series and blockbuster movies, access to product placement opportunities and even TV series built around their products.

"We've had all sorts of ideas brought to us from talent agencies -- shows built around products," said a senior ad agency holding company executive. "A joint venture could involve a deal in which the talent agency would come up with ideas, and the ad agency would come up with the clients, and there'd be shared revenues."

"This was where sports marketing was 30 years ago," said Mr. Guarascio of the current movement. "This whole sector of marketing and entertainment is going to be very important. Agencies are going to better serve their clients."

Staff writer Lisa Sanders contributed to this report.

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