Commentary by Scott Donaton


Why Their Demise Can Benefit the Ad Industry

By Published on .

Having grown up mostly in Brooklyn, I know very little of gardening. But from what I understand of the benefits of pruning, the removal of dead leaves and branches allows more sunlight
Scott Donaton, editor of 'Advertising Age.'

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and air to reach, and nourish, healthier ones. Both the ad agency and magazine industries are being pruned now and, while the loss of jobs is unfortunate, the process should be seen for what it is: a healthy prerequisite to the revitalization of those industries.

Give up the ghost
Let's start with the agency business and with a simple fact: It's time for Cordiant Communications and Bates to give up the ghost. Cordiant Chairman David Hearn says he's looking for a turnaround when the only thing he should be seeking is the exit. Cordiant and Bates are marginal, tarnished brands that no longer offer clients a distinct point of difference. Which is why they have almost no major clients, Allied Domecq being the latest to pull out.

Hearn told The New York Times last week he hopes to reposition Cordiant as an alternative to larger rivals, such as Omnicom Group and WPP Group. Yeah. Why would any marketer remain with a vibrant, viable operation when they can switch to a hobbled, debt-laden one with an uncertain future? If Hearn wants to meet his commitment to shareholders, he'll sell Cordiant for parts as quickly as possible. Some will survive as independent operations; ailing Bates is better off merged into something else. Already, Cordiant has reported a "very preliminary approach" by an unnamed suitor.

Decline of storied brands
It's sad to witness the decline and fall of storied agency brands such as Bates, D'Arcy and Ayer. And the loss of jobs is always painful. But looked at less nostalgically, it's logical that companies that perform poorly, that produce an inferior product and no longer articulate a unique selling proposition should be pruned for the health of the overall industry.

Cordiant in the end isn't a victim of consolidation. The concentration of agency ownership has claimed its share of innocent victims, to be sure, yet many independents have thrived by delivering solid strategic insights and cut-above executions. Cordiant performed admirably for some former clients, such as Wendy's and Hyundai, but, ultimately, it ran itself into the ground, unable to capitalize on the bountiful growth opportunities it once claimed a de-merger from Saatchi & Saatchi would supply.

Magazine industry shakeout
The magazine industry, too, is in the midst of a shakeout that could prove beneficial. Because consolidation put more titles under the protection of deep-pocketed parents, many weaker magazines were able to weather the recession in 2001 and 2002. But as recovery remains elusive, a growing number of magazines are being shut down or downsized, the most recent examples including Travel Holiday, Worth, Gear and Victoria.

The closings of magazines are almost always tsked-tsked over, as if it's inconceivable that a magazine could ever fold, or that there could be a natural life cycle for them. Contrast that with TV. As David Spade told me last week when discussing NBC's cancellation of his sitcom Just Shoot Me, "We had a seven-year run. How often do you get to do that?"

A quick scan of newsstands illustrates the market saturation as clearly as any industry figures. There are still too many magazines being published, more than 5,000 consumer titles in the U.S. alone, and not enough readers or advertisers to adequately support them all. More will succumb. But they will mostly be the weaker players, the dead leaves and branches of the business. When they're cleared, more sunlight and air can penetrate through to those that remain.

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