PR INDUSTRY HIT HARD BY WAR

Shrinking News Hole, Canceled Campaigns, Satellite Overload

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NEW YORK (AdAge.com) -- Following a disastrous 2002 for the public relations industry, the war in Iraq now threatens to blight 2003. The most immediate problem
Travel companies such as Orbitz were among the few that got a PR boost from the war. Reporters wanted to know about the conflict's impact on the travel business.
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for PR agencies is the shrinking news hole -- a vital element of campaigns --now that it appears the war will go on for longer than some expected.

While the advertising industry seems to be on the return to something approaching normal business, the continued coverage of Operation Iraqi Freedom has presented a different set of issues for PR firms whose job is to do everything from finding the right tone in press releases to overseeing employee communications programs for firms with large numbers of armed-forces reservists.

Canceled campaigns
Numerous initiatives have already been canceled. With the media focused on the Defense Department's regular press briefings, the U.S. Treasury postponed its preview of the nation's new colored $20 bills, planned for the end of March. Since the new notes won't be available until the end of the year, the Treasury's Bureau of Engraving and Printing and its PR agency, Burson-Marsteller, part of WPP Group, are now pushing back plans until later this year.

Despite the fact that United Parcel Service gained good mainstream coverage of its new brand logo last week, it was forced to call off many of the celebratory events it had planned through its PR firm, Edelman. The delivery giant employs 1,000 army reservists. Michael Schiferl, director of Edelman's U.S. media practice, said that a global satellite hook-up to link employees in 200 countries was canned along with an event that was to be staged in New York City's Times Square.

Adding flag
While UPS's rebranding was long planned, Edelman also helped its client, the Puerto Rico Tourism Co., with some rapid repositioning. The tour company asked that the U.S. flag be added to its communications alongside the country's own flag. It also wished to play up its status as an American territory.

Beyond the obvious reduction of media coverage, PR agencies face other logistical problems too -- many of the satellites used by agencies to broadcast media tours to local stations are tied up by the media beaming the war into U.S. living rooms.

Peter Himler, managing director at Burson-Marsteller, said that while there's been a lot more latitude to proceed with programs than post-Sept. 11, "we are not seeing people switching money from advertising into PR programs. I'd say clients' PR programs are more susceptible to current events than advertising." He added some clients such as travel Web site Orbitz were in demand from media outlets doing stories on the war's impact on travel.

International campaigns
Andy Cunningham, president-CEO of new agency CXO Communications, in San Francisco, said that war, coupled with the fears of the virulent Asian flu virus, has made it even harder to execute international PR programs. Ms. Cunningham said she's seeing more companies moving to work with smaller boutiques closer to home.

On the international front, Sharon Gamsin, vice president for global communications for MasterCard International, has to worry about the sensibilities of customers and the media in the Middle East. "The Middle East is taking a lower profile than, say, Latin America. My advice to staff is that they are in the best position to be sensitive to what's going on. I tell them if they think their media will report it, it's their call," she said. In the U.S., MasterCard is continuing to release general business news. "We need to continue to run our business. You can't let life stop," Ms. Gamsin added.

Revenue impact
Interpublic Group of Cos.' Weber Shandwick Worldwide has not seen a major impact on revenue -- yet. According to Chairman Jack Leslie, "Companies are looking more to their PR agencies for help to think through the issues. The service is more appreciated." But, he added, "overall, it is one more serious problem in a year fraught with problems."

According to holding company reports for 2002, Omnicom Group's PR unit saw revenue fall 6.2% to $921 million, while advertising grew 9% to $3.3 billion. At WPP, PR and public affairs revenue fell 10.9% to $718 million while ad divisions declined 1.7% to $2.9 billion. Interpublic groups PR with marketing communications functions; marketing communications revenue fell 10.9% to $1.7 billion, against advertising/media revenue that slid 8.9% to $3.7 billion.

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