High price of mergers

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Tv network consolidation has some TV media buyers concerned that network owners could gain the power to corner and control the price and availability of TV commercial time.

The most common concerns expressed by buyers surround a network group's ability to either control pricing, gain access to a specific demographic set, or force buys upon media buyers.

A demographic power-grab already is happening, says Jean Pool, exec VP-director of North American media services with J. Walter Thompson USA, New York.

In a 1999 report for the U.S. Justice Department, Ms. Pool found that the combination of CBS and Viacom would control a 28% share in women 25-54 for national options, with more than 30 shows weekly targeting that segment.

"That type of consolidation is too consolidated," Ms. Pool says. "Sometimes big gets too big."

Buyers worry that to nab a prime spot on CBS or MTV, they would have to agree to take time on fledgling UPN, all of which are owned by Viacom.


Consider the possibilities. CBS Corp., which acquired King World Productions, was acquired itself for $37 billion by Viacom, which in turn already owned network properties such as UPN, Nickelodeon, MTV and VH-1.

NBC announced late last year that it intended to take a $400 million stake in Paxson Communications Corp. And there is Capital Cities/ABC and its ESPN unit, acquired by Walt Disney Co. in 1996.

As media companies continue to grow and vertically integrate their holdings some media buyers fear that new programming content on the major cable and broadcast networks will suffer. They fear new programming will be replaced with ever more reruns and spinoffs.

"There is this dramatic development occurring in our industry today," says Bruce Johansen, president-CEO of National Association of TV Programming Executives. "In some respects, it's good because it makes business more efficient."

Taking that into account, some media buyers are less fearful. After all, they say, as the media companies consolidate and gain clout, so too are media buying services.

No adverse impact has emerged so far for media buying organizations from consolidated media companies, says Bill Croasdale, office of the president at Western Initiative Media, Los Angeles. In fact, the companies are taking advantage of their multiple properties to package combined media offerings, he says.


CBS Plus, the network's sales division, offers network and station TV and radio commercial time, and out-of-home opportunities, Mr. Croasdale says.

"They're trying to package all of the media as a single advertising opportunity," he says.

As agency holding companies such as WPP Group, Interpublic Group of Cos. and Omnicom Group trend toward larger media buying operations, it increasingly will become a scenario of "clout vs. clout," speculates Mr. Croasdale.

"Power begets power, and a lot of us in the business feel within the next three to five years we will wind up with five to seven major media companies," he says. "And facing off against them will be five to seven advertising marketing giants."

Ms. Pool disagrees. Consider this: the combined broadcast buying strength of merged JWT and Ogilvy & Mather nears $2.5 billion, or roughly 10% of the national market, she says.

"The fact is that national networks are always sold out, and it's a heavy seller's market," she says.


For his part, Bob Igiel, president-broadcast division, Media Edge, New York, says he doesn't believe any negative impact exists as a result of media consolidation.

It comes down to business fundamentals, he says. The larger media sellers are bringing innovative media programs and packages to Mr. Igiel and his clients.

Media Edge brokered a four-year, multimedia deal between AT&T Corp., Walt Disney Co.'s ESPN and ABC Sports. The deal, worth an estimated $20 million to $30 million annually, cuts across 15 properties of ESPN and ABC, unifying the two network groups' TV, radio and magazine products. It includes programming lynchpins "ABC Monday Night Football," ESPN The Magazine and sponsorship of college football's Rose Bowl.

When a media seller has brought undesirable media to his table -- whether it's outdoor, local spot, cable or network -- Mr. Igiel has been able to tailor the right package by cherry-picking the best components.

"They're not all perfect," he says. "Some people are confused by it. We're not. We have taken advantage of it for our clients, and done some great work."

Any boost in the cost of TV commercial airtime as a result of network consolidation among ownership groups only heightens the attractiveness of other media, adds Jon Mandel, co-managing director of Grey Advertising's MediaCom, New York.

Direct mail, for example, has been considered expensive. But compared to the cost of all TV commercial time, direct mail's targeted delivery could find more receptivity among media buyers -- especially if pressed into inefficient TV buys, Mr. Mandel says.


Also, fears of market dominance overlook one emerging medium: the Internet. Where TV and radio are controlled by a finite supply of owners or operators, the Internet is proving to offer a limitless supply of content and segments. This fact has surely not gone unnoticed by Time Warner, the No. 1 media company.

Last week, Time Warner announced a $180 billion merger with America Online, the world's leading Internet service provider.

"If [Internet content is] big enough and successful enough, it may change the paradigm enough that TV is not the preferred delivery form to get to an audience," Mr. Mandel says.

To wit, the NATPE 2000 conference will not see booths for distributors Rysher Entertainment or Worldvision Enterprises -- both have been absorbed by Paramount Domestic Television. But hundreds of technology companies such as Microsoft Corp., Sun-Microsystems, Yahoo! and Digitalconvergence.com have forced the organization to open a third New Media Pavilion, Mr. Johansen says.

"It's a dramatic, different look on our floor," he says. "It's been balanced by interactive companies that are filling the niche."

Increasingly, TV media consolidation will remain an emerging force, media buyers say. While some believe the U.S. Justice Department will regulate the share and control exerted by the emerging media organizations, others aren't so sure. They fear repercussions by media companies could lead some to silence concerns.

For her part, Ms. Pool would prefer the issue stays a non-issue. "Best it doesn't get there," she says.

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