Infinity/Westinghouse-CBS combo raises fears of high ad rates
The $3.9 billion purchase of Infinity Broadcasting by CBS parent Westinghouse Electric Corp. is substantially increasing advertiser concern about predatory pricing.
A primary advantage for advertising on the $11.5 billion radio medium is low cost. But with the pending merger, more than $1 billion of that could be controlled by the new group, and more than 30% of radio ad revenues in six of the top 10 markets.
JUST A MATTER OF TIME
While ad agency media buyers report no substantial increases in ad rates due to other recent industry mergers, such effects as limited control of certain demographics and formats are increasing. And price hikes, they say, are just a matter of time.
"The merger will drive up ad rates," said Jean Pool, exec VP-director of North American media buying services at J. Walter Thompson USA, New York. "In a city like Philadelphia, where Westinghouse/CBS/Infinity will now control [nearly 45% of] the market, we might as well open up our wallets right now."
Westinghouse Chairman-CEO Michael Jordan dismissed advertiser concerns, telling Advertising Age the merger will be good for advertisers.
"We will be able to provide advertisers better services because we'll be able to offer them a package of demographics, and we'll be able to help coordinate advertiser promotions better," he said.
Ad agency buyers largely disregarded such advantages, lamenting that there are already few options for certain demographics and no options in some formats such as news in many markets.
"There is no doubt in anyone's mind that this is to the seller's advantage and not the buyer's," said Joy Kingshott, supervisor of network and spot radio at Young & Rubicam.
Infinity President-CEO Mel Karmazin, who is to lead the new unified station group, said the merged company would not force advertisers to buy a weak station when they wanted to make a buy on a strong station.
"We've never done that and never will," he said.
Ad agencies say they are exploring alternative media in anticipation that pricing will become more of an issue.
"We may try to find other formats that deliver or go to another medium," said Allen Banks, media director-North America at Saatchi & Saatchi Advertising Worldwide.
The Westinghouse/Infinity deal will open a new chapter in government review of media mergers, say some lawyers familiar with the process.
With the lifting of most of the ownership limits by Congress last year, the agency to review the Westinghouse deal--either the Department of Justice or the Federal Trade Commission--for the first time will have to decide what concentration means in the radio marketplace alone.
Westinghouse is expected to argue that radio isn't a separate market and the federal review should include TV, newspapers and outdoor.
Some ad groups and at least one Federal Communications Commission commissioner are questioning that stand.
"For certain kinds of advertising, the radio market is the relevant market," said John Kamp, senior VP at the American Association of Advertising Agencies. "We are very concerned about media concentration. We are concerned that an artificial increase in spot prices in these markets is possible."
FTC CHAIRMAN'S VOICES VIEW
FTC Chairman Robert Pitofsky has warned that antitrust enforcement has to look beyond simple domination in media acquisitions and look at the effect on "voices" in the marketplace.
"Antitrust enforcement should be more than economics," he told Advertising Age last week. "Concentration in the media could have an effect on the different voices to be heard."
In the Time Warner/Turner Broadcasting System merger, he wrested away Justice's normal oversight of the broadcast industry.
Contributing: Chuck Ross.
Copyright June 1996 Crain Communications Inc.