Maurice Levy, CEO of Publicis Groupe, faced one of his toughest audiences last week. At his solo briefing to a crowd of analysts and investors at the UBS Warburg media conference, John Perriss, worldwide CEO of Zenith Media, and Richard Hamilton, Zenith's CEO of the Americas, were in the front row.
"Maybe you can help me here," said the momentarily self-conscious Frenchman, turning to Mr. Perriss and inviting him onto the stage to explain the benefits of unbundled media companies. Mr. Levy had just begun to discuss his designs on Zenith Media, which his company half-owns and desires more of.
"No, you go right ahead," Mr. Perriss demurred, placing the spotlight back on Mr. Levy.
Like a bit player who is suddenly thrust in the footlights, Mr. Perriss and his agency have warmed to some well-deserved media attention lately. This year, Zenith won approximately $1 billion in billings, besting top media agencies in a trifecta of prominent reviews for AstraZeneca's Nexium, Verizon and ExxonMobil. The media agency also recently gained a new owner, Publicis, which acquired Saatchi & Saatchi and its half ownership of Zenith. (The other half is owned by Cordiant Communications Group.)
Zenith has also been involved in a high-profile custody negotiation between its parents, in which Saatchi and Publicis hope to wrest away most of Zenith's ownership from Cordiant. Finally, Zenith is currently engaged in a legal dispute with Saatchi, after approximately $150 million of Hewlett-Packard's media business was moved to Publicis media agencies.
At the Warburg conference in New York, Mr. Levy and Michael Bungey, CEO of Cordiant, which held its briefing two hours after Publicis, fielded questions primarily about Zenith. Mr. Levy said he hoped to create the fourth-largest unbundled media agency in the world-larger than Aegis Group's Carat-by putting Zenith and Publicis' Optimedia together in an as-yet-unnamed media holding company. The two agencies will not merge, he insisted, but will be competitive and share some back-office functions and media tools.
Later, Mr. Levy told Advertising Age that in order to realize that scheme, he would have to own more than just half of Zenith, and said he was negotiating to buy a majority stake in the company. That transaction, he hoped, would come to a close early next year.
"What Maurice Levy said is accurate," said Mr. Bungey, adding Cordiant was willing to be left with only a minority share of Zenith, "as long as we get the right price and we are protected." Also part of the deal, confirmed by Messrs. Perriss and Bungey: Zenith will purchase media departments of Cordiant unit Bates Worldwide that are currently licensed by Zenith in Asia-Pacific. "We call them our franchises," said Mr. Perris. "Like McDonald's."
According to Mr. Perriss, no actual cash will change hands. Rather, the transactions will affect Zenith's financial reporting structure.
Cordiant will not join Zenith's continuing pursuit of legal action against Saatchi, according to Mr. Bungey. Mr. Levy refused to comment on the suit. Zenith is talking to lawyers about suing Saatchi for willingly shifting its Hewlett-Packard account to Publicis (AA, Oct. 30).
"Yes, we have this dispute," said Mr. Perriss. "We think there may have been a breach and we are following through."
Mr. Perriss founded Zenith in 1988 when he was the corporate head of media at Saatchi & Saatchi Advertising, at the time a holding company with several agencies including Bates. The original idea was for the agency to become the unbundled buying power for all Saatchi agencies. "It met with massive resistance here in the States," said Mr. Perriss. "I was told that perhaps we should go and try it in our own backyard, and so that's what we did."
Initially, "Eighty percent of the revenues came from the host agencies," said Mr. Perriss. In 1998, the Saatchi Group was broken up; like a child fought over by divorcing parents, Zenith was split between Saatchi and Cordiant.
Today, Zenith is nearly as independent as any stand-alone media specialist. Since the Verizon and ExxonMobil win, more than 80% of Zenith's business is from clients it won on its own that do not have ties to Bates or Saatchi. Of its business that's allied with creative, more than 90% of it comes from Saatchi clients, mostly from Toyota Motor Corp. The shop now claims worldwide billings of over $8 billion, with 68 offices in 38 countries and 1,700 employees. It ranks No. 12 on Advertising Age's list of top media agencies.
"Most of our business is our own," said Mr. Perriss. "It just so happens [Cordiant and Publicis] own the business."
While Zenith faces some big changes, one thing will remain the same. Mr. Perriss, its founder, chairman and guiding light, will not own even a small piece of the agency. "If you are hired as a hired hand," Mr. Perriss reflected, "a hired hand is what you are. I took the job on that basis."
Copyright December 2000, Crain Communications Inc.