TV networks unmoved by buyers' added bulk

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WPP Group's decision to form buying powerhouse GroupM as a parent company to Mediaedge:cia and MindShare will not necessarily have the desired impact of enabling the agency to land better TV-program prices at the upcoming upfront, claimed rivals and TV sellers.

GroupM, which claims it will represent $31.5 billion in worldwide billings, is the latest effort by an agency holding company to create a buying behemoth, and WPP's expectation appears to be that GroupM's size will reward it in the prime-time TV upfront. But analysts said they don't believe these super-size media agencies are getting better deals in the face of a still-rising TV ad market.

blue chips

GroupM comes to market not just with a bulging purse but with new blue-chip brand names: Burger King and Gillette. According to an internal WPP memo, GroupM was created to develop research and strategy tools together, share back-office expenses, and most importantly, raise WPP's buying power in the market. GroupM's Worldwide CEO Irwin Gotlieb declined to comment.

But many network sales executives say that despite their impressive numbers and clients, GroupM will not make them blink.

"We are not going to change our network because they are a big conglomerate," said one broadcast network president of advertising. "Can I live without one or both of them? No. But doesn't mean I'm going to give them better pricing."

Last year, the new monster at the upfront was Interpublic Group of Cos.' Magna Global, with combined U.S. billings of $16 billion. But not all of that, apparently, was brought to bear on the market, since not all the clients of Universal McCann and Initiative, Interpublic's two media buying agencies that were to work with Magna Global, chose to negotiate deals through the unit. Also on hand last year: Omnicom Group's OMD, with $7.64 billion in U.S. billings; Publicis Groupe's Starcom MediaVest Group, with $10.12 billion; and Zenith Optimedia Group, with $6 billion. But big media shops did little to drive prices, as the 2002 upfront market witnessed 20% hikes in overall dollars, and anywhere from healthy 6% to 10% gains in cost per thousand viewer prices.

too big to walk?

Media analysts say the big conglomerates can't hold back the steady rise of prices. Because of their increased billing size, they need to spend money on the bigger networks that can accommodate them.

"If you are too big, you can't walk," said Jon Mandel, co-CEO and chief negotiating officer, Grey Global Group's MediaCom, New York, a medium-size shop with $4.2 billion in U.S. billings.

Last year, MindShare and Media-edge:cia worked together sharing information for a number of major clients during the upfront, said insiders. According to several TV sales executives, all Mediaedge and MindShare broadcast agreements were closed together in the upfront. Only when it came to cable and syndication deals were deals done separately.

Although networks do not appear to be intimidated by mega shops, they are respectful. "You now have seven [media] conglomerates controlling over 80% of the money," said one veteran network executive. "It's a little bit scary."

One network executive wondered how agencies use the leverage of buying media together with competing brands on their rosters. MindShare now has Burger King; Mediaedge has Yum Brands, which owns Pizza Hut, Taco Bell and KFC.

"One of these days, one of these clients are going to say `Wait a second. Why are they getting this and I'm getting that?' ... I don't see how you serve all these clients."

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