Sellers: Mega-shops slow in upfront

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This year ushered in the age of the monster media holding companies, whose massive combined spending was supposed to bring clients more clout in the upfront TV buying market. But, according to some media executives, bigger was not necessarily better.

Interpublic Group of Cos.' Magna Global, which went to market for clients of Initiative Media and Universal McCann, commands about $16 billion of U.S. media billings, according to Advertising Age's list of top media shops. WPP Group's MindShare and sibling shop Mediaedge:CIA, both part of Group MindShare Edge, bill over $12 billion in the U.S. and went into the marketplace together. Omnicom's newly reconfigured OMD, with planning and buying now integrated together, bills almost $8 billion. The mantra of these media conglomerates is "size delivers clout."

slow movers

But according to sellers and buyers for midsize media agencies, some of whom requested anonymity, OMD and Magna were the bulkiest and slowest players in the market, unable to use their size to negotiate from strength. These executives maintain that because of the giant's size, in terms of dollars and number of clients, these shops had to cut hasty last-minute deals, most on terms favorable to media companies, or else be left out of the market.

"They actually caused an increase in prices," said Peter Knobloch, president of RJ Palmer, an independent media shop that bills $553 million in the U.S. "The marketplace was set up to have minimal increases. NBC and CBS were probably looking at 5% to 7%. As it turned out, they got significantly more. The big agencies brought NBC up and Fox up. I think every network is happy with this outcome."

Dan Rank, managing partner of Omnicom's OMD, denied OMD moved slowly. "We spent every single dollar we wanted to with every single vendor." As to whether OMD helped drive up prices, he said, "The market was certainly stronger than anyone thought it would be. But that has no bearing on size. The market was strong for the big guys and the little guys."

getting the lead out

"We were done quickly," said Marc Goldstein, president-CEO of MindShare North America, who negotiated in the upfront with Rino Scanzoni, president of national broadcast for MediaEdge: CIA, New York. "The market lasted no more than three or four days and we finished making our deals in the early part of that."

Some media sellers felt the big shops needed to get the lead out. "They are not nimble," said Joe Abruzzese, CBS Television Network president-ad sales. "They moved slowly." When it came to making the upfront deals, "it's really reverse leverage" with the broadcast networks gaining the advantage, he said.

Media sellers said the sheer number of clients and balancing competing needs slowed down some of the negotiations with the biggest media-buying shops. "They did not move fast, they weren't able to react quickly because they have like 30 accounts to worry about," said a top network seller who requested anonymity. Many believe these shops are so large they can't force networks to lower prices because they can't afford to pull out of deals. They have so much money and so many clients at stake they were forced to compromise.

"You have to be big enough to get attention but small enough to walk," said Jon Mandel, CEO of Grey Global Group's MediaCom, a midsize media agency with billings of $3.6 billion in the U.S. "Your ability to make a deal is commensurate with your ability to walk away from it."

One of Magna Global's clients, Sony Pictures, demanded some of its deals be done outside Magna's general negotiations, but still under the purview of the agency, according to executives close to the companies. Sony marketing executives believed it would gain advantages with younger-skewing TV properties if it approached those outlets on its own, rather than being lumped with an older-skewing advertiser's dollars, such as pharmaceutical brands. Executives at Magna did not return repeated phone calls. A Sony spokesman declined to comment.

According to executives at smaller shops such as Horizon Media (billings of $800 million), they cut some of the first deals in the upfront and were able to get the right units for their brands.

"This was the year to be small," said an executive at a smaller shop.

"We were in the early part of the two-day frenzy," Mr. Knobloch said. "We are very comfortable where we are with our clients. The whole purpose is to get a good deal, and that's what we got by going in early."

eaten alive

The big players believe they were more nimble than competitors portray.

"You need to get three big guys in a room with three small guys and let them go at it," said a top media agency executive. "You'll see the big guys eat the little guys alive."

And even if the giants had to concede some ground to the networks, most agree their size did earn them a certain amount of clout at the bargaining table.

"The little shops fly under the radar. Mel Karmazin is going to ask, `Where do we stand with OMD, with Magna Global and with MindShare. He's not going to ask, `Where do we stand with [Omnicom's] GSD&M?"' the top media executive said.

But some executives at monster media agencies admitted that their shops cannot shut out a network from their buys. "Our clients need these media properties, whether it is WB or Lifetime or Comedy Central. Unlike a small agency, which can shut them out, we can't," said Mr. Rank.

MindShare's Mr. Goldstein suggested that broadcast negotiations could be handled by redirecting business. "You can move money into syndication or cable," he said. Mr. Rank agreed. "That is more clout."

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