Publicis Omnicom Merger

What the Publicis-Omnicom Merger Means to Media Owners

Scale could help mega-agency drive down pricing

As TV execs mulled over the whys and wherefores, publishing and radio execs likewise downplayed the notion that the combined company would have more leverage in negotiating ad rates.

"That's not generally how the holding companies have approached the market," said Paul Caine, CEO of radio company Dial Global and formerly the chief revenue officer of People and Sports Illustrated Time Inc. "We're still talking to them account by account, division by division, agency by agency. We're not seeing holistic deals by buying groups."

David Jackson, evp at fitness and celebrity publisher American Media Inc., said that as print selling has become more integrated with digital and other platforms, it’s become harder for agencies to drive down costs. “Gone are the days when you’re just doing a print buy,” Jackson said. “Our partners no longer look at print versus digital versus mobile. We don’t package any one part of our business any longer.”

Others take the view that agencies aren’t taking advantage of their clout as it is and that the merger is more about wringing costs out of their operations than driving down rates.

A Wall Street analyst who wasn’t authorized to speak on the record echoed that view. “If you’re a seller of great content, I really don’t think this case is going to have great impact,” the analyst said. “There’s a ton of buyers for your service. Maybe for the marginal content [though].”

Many execs in the digital-media space said that the merger wouldn’t necessarily usher in sweeping changes in that sector. “We have rates with advertisers based on what category of client they are, not based on what agency they’re with,” said Jason Krebs, president of sales and marketing at Blip. “It’s very hard to see that changing. It’s almost unseemly for an agency to think that because they spend with you for one piece of business they should get a rate preference for another piece of business.

“What we really know about how agencies make money, and how hard it is to make those margins, is that they are big banks," continued Krebs. "They make money when they pay their media partners.”

While early estimates see POG laying claim to a 40 percent market share of the six major agency holding companies, the current leader isn’t exactly shaking in its boots. Characterizing the proposed merger as “an interesting move,” GroupM global president Dominic Proctor suggested that achieving scale may be easier said than done.

“Neither Omnicom nor Publicis was able to bring their investment teams together effectively as individual companies, so it will be fun to see if [Publicis and Omnicom] can now do it together,” Proctor said. “Getting scale in media investment management is critical for clients, but it only works if it all joins up. … Media investment management relies heavily on scale, but scale counts for nothing if it continues to be disparate.”

Should Publicis and Omnicom clear regulatory approvals, the deal could be closed before the end of the year.  —Additional reporting by Lucia Moses and Sam Thielman

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