OMD-Disney renewal up in air

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The groundbreaking $1 billion media deal struck between OMD USA and Walt Disney Co. faces major hurdles if it is to be renewed, given that both sides have question marks about the success of the deal last year.

This week the two parties begin discussions on a possible second year for the pact. But executives close to both companies said last year's deal didn't quite live up to its billing, with Disney's ABC receiving less than the promised $1 billion spend and some OMD clients complaining they felt under pressure to spend money on Disney properties.

`fallen short'

"They have fallen short of spending," said one of the executives. "About $100 million overall." The OMD-Disney deal structure gave ABC 25% more in TV advertising dollars than it would have received without the deal, according to the executives. In return, Omnicom Group's OMD received cost-per-thousand savings on its buys. But the shortfall in total spending left some Disney units in the lurch, they said, including some cable networks wholly or partly owned by Disney. In addition, they said Disney's ABC-owned TV stations didn't see their full share of the OMD buy.

ABC itself didn't get as much "scatter" money-the short-term and near-term buying of TV commercial time-from OMD as anticipated, according to the executives. The reason: There was less anticipated inventory to sell because TV advertisers canceled very little of their upfront schedules. ABC executives would not comment on any aspect of the deal.

hemmed in

Executives close to the companies also said some OMD clients complained they felt hemmed into spending money with Disney that they might have spent elsewhere, and that well after the deal was struck, senior OMD executives were still looking for more money to fulfill the billion dollar commitment to Disney. OMD clients include Visa International, PepsiCo and Nissan.

Dan Rank, now exec VP-advertising sales for Vivendi Universal's Universal Television Group, who championed the deal last year as managing director of OMD USA, would not comment. But current OMD executives said they were satisfied with the deal.

"I would characterize the deal as an `A' to an `A Plus'," said Ray Warren, managing director of OMD USA. "Did we fall short a little bit? That's not the point. Everyone is pleased with it. Globally it works; both sides achieved their objectives. Sure, if you get down to the details, that may have made people [clients] a little crazy."

Mr. Warren added: "Some cable networks may have been disappointed because they thought they would [get] more, but it wasn't in violation of the deal."

But Disney may not feel it needs to renew. Last year, ABC was in a weak position as the fourth-rated network among adults 18-49 with little upside in sight. In addition, the network was reacting to the perception that the TV ad marketplace was weak and hoped to grab a greater share of dollars.

This year, however, it's staged somewhat of a comeback. Under new President of ABC Entertainment Susan Lyne,it managed to improve in some dayparts, particularly Tuesday nights with "Eight Simple Rules for Dating My Teenage Daughter." This year, so far, ABC is up 3% among adults 18-49, tying CBS's Nielsen Media Research 3.8 rating.

In addition, the TV advertising marketplace has been robust, with scatter pricing up 25% to 40% for some programs. That's given TV ad sales executives confidence the market could soar, with low double-digit CPM gains over a year ago.

"This deal was done as a partnership," said Mr. Warren. "It should be agnostic to the marketplace. The devil is in the details, and those are things we are going to tweak if you are going to do another deal."

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