CHICAGO While reviewing his $30 million media account, Starz Encore Group's David Charmatz considered a wide variety of contenders, from full-service agencies such as Wieden + Kennedy and Publicis & Hal Riney to small media specialists including KSL Media and Mediasmith and one large media agency, Mediaedge:cia.
Last week, the pay cable network awarded its account to Publicis Groupe's Fallon in Minneapolis, in part because of the attention the account would receive from the agency's senior management, said Charmatz, the client's svp of research, analysis and strategy. The incumbent was Havas' MPG.
The win—Fallon's first media-only assignment—is the most recent example of the evolving dynamics in the chase for medium-sized media accounts. Bundled shops like Fallon are picking them up again; they are still the sweet spot for small and midsize independent media agencies; and the big media brands are making their own plays for them through specialized divisions.
Of the nearly $130 billion of media spending tracked by TNS Media Intelligence/CMR in the U.S. last year, $72 billion was handled by the top 10 media shops proper, according to Adweek estimates. That leaves about 45 percent —some $58 billion—to be handled by others. In 2003, more than $750 million in media billings, most of it handled by top 10 media shops, shifted to a bundled agency, a small independent or a specialized division of a big holding-company media brand. (In 2002, second-tier competitors took in $885 million in billings.)
"You have some smart people who are coming in under the radar screen and who have a positioning for what they're offering that has some relevance to a Starz," acknowledged the head of one of the top 10 media shops.
Fallon media director Lisa Seward said staffing was not a major focus of the agency's pitch, but added, "We just put senior people on business."
"There are advertisers with midlevel or small budgets that believe they would get lost at a mega agency," added Jim Surmanek, CEO of media consultancy MediaAnalysisPlus. "They want hands-on senior management."
The big media-agency networks have countered by creating specialized units to go after smaller accounts or by partnering with small and midsize creative shops. Examples include Carat's Alliance, Initiative Partners at Interpublic Group's Initiative, and Starcom MediaVest Group's StarLink. They compete with a positioning that marries small-shop service with big-shop resources.
StarLink, for example, has added nearly $100 million in business this year from small clients such as Chuck E. Cheese, American Laser Centers and Caterpillar, according to president Scott Neslund. SMG's resources—in particular its work for kid- oriented brands such as Kellogg's and Nintendo—were key in helping StarLink win Chuck E. Cheese's $25 million account (formerly at Initiative in Los Angeles) without a review, said vp of marketing Jon Rice.
In addition to selling senior-level experience, the smaller shops also sell themselves on "focus, top-level executives and that they're more nimble," said Bill Koenigsberg, CEO of Horizon Media in New York—at $1 billion in billings, the largest unaffiliated independent media agency in the country. "There is a slice of the [market] that is going to go that way."
The bundled agencies, meanwhile, often use the same tactics that the giant media shops use to grow—parlaying creative wins into additional media business. In the past year, for example, IPG's Deutsch added media duties on the $170 million Bank of America business (formerly at Starcom), the $30 million Monster account (formerly at Arnold) and TGI Friday's $50 million adspend (formerly at Universal McCann). Each shift followed a creative win. But in each case, Deutsch convinced the client it could handle planning and buying.
As consolidation proceeds apace among the biggest advertisers, insiders expect the opportunities for those under top 10 size to continue to grow. "There's no doubt in my mind that there are clients that are underserved by some of these bigger shops," said John O'Connnor, president of media consultancy Relevant Insight in Boston. "Clients always want to feel like they're No. 1."
The broadcast upfront marketplace began moving quietly and orderly last Wednesday, and by the end of the week media buyers had spent some $3 billion, about one-third of the projected total. The remainder was expected to go down quickly early this week, when media buyers and network sales execs returned from Memorial Day weekend.
Fox was the first to write upfront business, on May 26, doing early deals with all the major movie studios and then with several automakers. The WB, beginning May 27, also wrote early movie business and took in significantly more auto dollars than it has in past years. CBS and sister network UPN also cut some early deals, as did ABC. NBC, usually the first network out of the gate, was the only one to hold out by afternoon Friday, although there was talk it might wrap up some retail business before the weekend.
Unlike last year's upfront, with its double-digit cost-per-thousand increases, this year's early CPM jumps were below 10 percent, except for UPN. Of course, UPN, has the lowest rates of all and got only mid-single-digit bumps last year. Since it actually had a hit with America's Next Top Model this season, UPN was able to cut early package deals tied to it at 10 percent hikes. CBS did some early deals at just under 10 percent, said media buyers, in an effort to grab a chunk of ad revenue before NBC began dealing in earnest.
One buyer said the broadcast networks got higher CPMs for movie and auto advertisers because they are the most time- and day-sensitive and are willing to pay more to get the time slots they want. "These early CPM numbers should not be looked at as what the broadcast networks will eventually average for the entire upfront," the buyer said, adding, "If they do hold up, it is going to mean that the gap in the cost of broadcast prime time versus cable is going to widen even more."
The four big cable groups—Turner Broadcasting, MTV Networks, Discovery and NBC Universal Cable—were 50-90 percent wrapped by Friday, pumping more than $3 billion into their coffers. Cable, as a whole, is expected to grow its upfront revenue by 15 percent to bring in an estimated $6.1 billion.