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WHITE SULPHUR SPRINGS, W.Va.-Procter & Gamble Co. Chairman-CEO Edwin L. Artzt dropped a bomb on ad agency leaders gathered here at the American Association of Advertising Agencies' annual meeting with a warning that agencies must confront a "new media" future that won't be driven by traditional advertising.

Declaring that the ad industry is in for its greatest period of upheaval, Mr. Artzt said mass marketers and their ad agencies are going to have to participate much more actively in creating and distributing the programming they use to reach mass audiences through new entertainment options.

His wake-up call is based on a belief that the future of ad-supported TV programming is uncer- tain. Noting P&G currently spends 90% of its $3 billion ad budget on TV, Mr. Artzt told his Four A's audience, "From where we stand today, we can't be sure that ad-supported TV programming will have a future in the world being created-a world of video-on-demand, pay-per-view and subscription TV."

These are designed to carry "no advertising at all," he said. As a result, mass marketers like P&G "will have a hard time achieving the reach and frequency we need to support our brands."

He later told Advertising Age: "The absolute key is to create ad-driven programming that suits the many new forms of media that are evolving."

Mr. Artzt also called on all industry-related trade associations, marketers and their ad agencies, media companies, and program providers to hold a summit conference of senior industry members "no more than six months from now" to address the challenges and opportunities of the digital age and advertising's role in the video market of the future.

Mr. Artzt's new-media point person at P&G-Senior VP-Advertising and Services Robert J. Herbold-told Ad Age that the world's largest package-goods company is involved in discussions with "several" major entertainment companies about possible programming joint ventures.

"We do some of that already, like `Northern Exposure' or the soaps we produce," Mr. Herbold said. "But now we're actively exploring many mass marketing possibilities."

Stressing that these discussionsare of the highest importance at P&G today, Mr. Herbold added,"Our intent is to form alliances with the major entertainment houses like Viacom, Disney and Sony USA to create programming with some combination of our agencies, the networks and the cable stations involved."

In building his case for a pro-active approach to new technology, Mr. Artzt outlined how brand loyalty will suffer if the advertising industry fails to influence and harness the new media. He said consumers want "choice, conve-nience and control," and are willing to pay "a fair premium to the programmers and media suppliers that meet these needs."

Mr. Artzt, however, sees opportunities for advertisers if viewers take to "time-shifting."

"We can use games, infomercials, video shopping malls. We'll have a whole bag of tools to engage and inform consumers, and if we do that right, we can keep people in their seats when the commercials come on."

Envisioning opportunities for mass marketers and their ad agencies to take advantage of change, Mr. Artzt, long a champion of the power of advertising, cited:

Interactive technology that can be used to engage consumers in commercials.

Direct consumer response. "If a consumer wants to know which Cover Girl nail polish matches the lipstick she saw in our commercial, we can tell her on the spot," he noted.

Targeting of not just demographic segments but individual households.

P&G intends to be involved in these programming ventures from beginning to end, Messrs. Artzt and Herbold said.

"We're going to participate in all phases of integrated programming," Mr. Herbold said. "We put up the media money, the entertainment houses provide production money, cable stations or a network puts up air time and we all promote it together and create an event. And that creates the mass market we need."

Mr. Artzt chilled many leading advertising agency executives at the Four A's gathering with his warning that agencies were in danger of being left behind by the sweeping changes taking place in the multimedia age.

He said that in interviews he conducted with such information age luminaries as QVC's Barry Diller, CBS' Laurence Tisch, Gerald Levin of Time Warner and TCI's John Malone there was a resounding "no" when he asked them if ad agencies were prepared to participate in the dawning new era.

"I was surprised," Mr. Artzt said. The media executives "all said that ad agencies have been reactionary about this whole thing."

Ad agencies must embrace today's new media opportunities just as the industry so swiftly adapted to changes brought by the coming of radio and then TV, Mr. Artzt said.

"We're going to pull the Four A's and the Association of National Advertisers together, and the Magazine Publishers [of America] also is definitely interested in joining forces with us," Mr. Herbold said.

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