The much-trumpeted advertising clout that was supposed to spring from media consolidation has yet to flex its muscles in the TV deal-making arena.
Two years ago, media agency OMD USA struck a groundbreaking, agencywide $1 billion integrated pact with Walt Disney Co. for all its media divisions. Nowadays, such deals are nowhere to be found. Typical cross-platform agreements are struck with individual clients in much smaller $10 million to $15 million range.
What happened to the clout that was supposed to follow media consolidation? Starting in the late 1990s, major media conglomerates from Viacom and Disney to Time Warner said one-stop shopping for their diverse media properties would reap billions of dollars in advertising dollars-all at a premium price.
Each company formed a unit to handle the multidivisional deals: Viacom Plus, Disney's ABC Unlimited and Time Warner's Global Marketing. Business has grown slowly, but there is little evidence that they are on pace to become the prime advertising-sales generators as hoped.
For example, Viacom Plus now pulls in some $600 million in annual sales, or 4% of the $16 billion in advertising sales for all Viacom, according to executives close to the company. "It's a tiny percent of its entire revenue," said one veteran cable-advertising-sales executive. Viacom Plus executives declined to comment.
Other media sales groups are at similar or lower sales levels. ABC Unlimited, which represents all Disney properties, has inked pacts worth $300 million to $350 million in annual sales, according to media executives. Fox Broadcasting, which now handles all integrated advertising sales for all of News Corp., pulls in somewhat less, in the $100 million to $150 million a year range, according to media executives. Time Warner's Global Marketing group is also in that range.
"There has been an evolution, as one might expect, from doing megadeals to working with a select handful of clients," said Joe Uva, president-CEO of OMD Worldwide. In 2003, OMD USA closed around three to six small to moderate- size integrated marketing deals.
Two years before, Mr. Uva was instrumental in pushing OMD USA into the massive $1 billion deal with Disney's ABC Unlimited-which executives believed would be the harbinger of big bucks to come.
But the OMD/ABC deal wasn't renewed the following year since OMD's clients' needs were met for the 2003-04 TV season. A prime lure for OMD to do the billion-dollar deal was the Super Bowl, which ABC aired during the 2002-03 broadcast season. The media agency also wanted to buy into the NBA, which was starting a new TV contract with ESPN and ABC. OMD handles major sports advertisers such as Nissan, Universal Pictures and FedEx.
When the integrated-sales groups first started, they were pushing all their media properties to garner $100 million deals. But advertisers resisted.
"Like buying clothes, they wanted you to buy the entire rack, the entire outfit-all their media. Advertisers want to pick and choose. The media deals are more strategic now," said Ray Warren, executive managing director of OMD USA.
For some media conglomerates, the initial euphoria of major cross-media advertising deals has also waned, and they have devoted less manpower to integrated media sales teams. The integrated-sales group News Corp One has been folded into Fox Broadcasting Co., and NBC Connect collapsed into NBC's regular advertising-sales division. However, with the NBC-Universal merger soon to close, many expect NBC to restart its integrated advertising/marketing group, which would also encompass deals for USA Networks, Universal Television and Universal Pictures.
Time Warner's Global Marketing group has also experienced a slowdown, according to media executives. It is looking for a CEO; President Michael Kelly left to become president of interactive sales marketing for the AOL brand.
One reason media conglomerates may have cut back is the actual time that goes into producing these deals. Unlike straight TV spot buys, which can take a few days to execute, integrated media deals can take months, if not an entire year, to put together.
Big ad-sales revenue for integrated sales groups may look great, but advertising executives say the real key is in obtaining incremental advertising dollars. These are ad dollars above and beyond what media companies' individual units-broadcast network, cable network, syndication, TV stations, print, outdoor or Internet sales groups-would get from advertisers had they struck separate deals.
Bill Bund, senior VP-integrated sales for ABC Unlimited, wouldn't discuss revenue details for his group, but said 30% or is incremental. "These deals are the new lifeblood of sales organizations. Our deals don't cannibalize other Disney business," Mr. Bund said. "
Mr. Bund said the sales group has done some 30 deals for the year so far-with a target of 15 more by season's end. This is up from the 10 to 12 deals two years ago. Media agency executives said Viacom Plus has been on a similar pace over the past few years.
Viacom Plus and ABC Unlimited are in a neck-and-neck race to become the industry leader. Viacom pulls in some $600 million, with a major part of its overall take coming from an annual $300 million marketing partnership with Procter & Gamble Co.-one of few recurring deals with an individual advertiser.
ABC Unlimited would rival if not exceed Viacom Plus should it add deals to its roster that were originally struck by Disney executives. Walt Disney Co. partners include McDonalds ($100 million in ad sales per year), Home Depot ($55 million) and Nestle ($50 million). Currently, ABC Unlimited services these clients.
Integrated sales groups incorporating network, Internet, magazine and other advertising sales aren't new. Virtually every cable network group, including Turner Broadcasting, Discovery Networks, Lifetime and others, has had them for years. But these groups' goals are more modest than the bigger media companies.
Three years ago, Discovery Networks, for example, pulled in $15 million from its integrated partnership deals. It now has $225 million in annual deals, with clients such as P&G and Clorox Co., said Joe Abruzzese, Discovery's president-advertising sales.
"It is the wave of future," Mr. Abruzzese said. "Selling spots and dots is one thing. But if you do that, you just live and die with just ratings. We really try to be marketers. In a supply-and-demand world, how do you get more money without discounting price? But if you are adding value to it, you can."
Mr. Friedman is a reporter at TelevisionWeek