MEDIA: FORUM; Should agencies fear a Telegraph-Express deal?

Should advertisers and their shops view the prospect of a Telegraph- Express newspaper sales house with trepidation? Will it trigger other alliances and the creation of more sales houses? And is conditional selling an immediate threat? After all, Media Audits reported last week that this worries many clients. Alasdair Reid reports

Should advertisers and their shops view the prospect of a Telegraph-

Express newspaper sales house with trepidation? Will it trigger other

alliances and the creation of more sales houses? And is conditional

selling an immediate threat? After all, Media Audits reported last week

that this worries many clients. Alasdair Reid reports



The Telegraph and Express groups took everyone by surprise last week

(Campaign, 10 May) when they announced that they were planning to merge

their sales operations into a newspaper sales house. The surprise was

not so much from the idea itself - the pros and cons of newspaper sales

houses have been done to death at media conferences over the years - as

a general feeling that if anyone was going to do it, they would have

done it years ago.



The theory always was that a concentration of power would affect all

aspects of the media business. We have seen it in action, up to a point,

on the buying side; ITV is now retrenched into three sales points. The

newspaper market has resisted this trend for so long that people had

begun to assume that the same remorseless ‘economies of scale’ logic

didn’t apply.



Well, the Telegraph and Express groups are about to find out one way or

the other. The planned new operation, with the working title Telegraph

Sales, will be headed by Len Sanderson, who is currently the Telegraph’s

deputy managing director.



Will it work? Should agencies and advertisers fear the implications if

it does? And will it trigger the emergence of other newspaper sales

houses? After all, the Express, according to highly placed sources, has

in the past come close to concluding similar deals with both the Mirror

Group and the Daily Mail and General Trust.



Guy Zitter, the managing director of the Mail, says people shouldn’t

listen to idle gossip. ‘Have we looked at this too? No - that’s

absolute rubbish,’ he comments. ‘The point is that it just doesn’t make

any sense. To sell a publication you have to know it inside out. You

have to sell the environment that the ads will appear in. You have to

know exactly who reads it and the way in which they read it. That’s a

full discussion. To sell a different publication is a whole different

discussion.’



Zitter maintains that the market shouldn’t fall into the trap of

comparing newspapers with television. ‘TV sales houses are in a totally

different position. For a start, they are all selling against the same

programming - Coronation Street is the star of the schedule wherever you

are. People may say that a loss in sales performance can be more than

compensated for by cost savings. But what really matters in the

newspaper business is not just the volume you sell but the price you

sell it at - that is the critical factor. Margins are thin. You have to

get it right.



‘The cost of sales departments should be less than 5 per cent of the

total revenue they bring in. If they are under that target, it is crass

stupidity to focus on cost when it could start to jeopardise revenue. To

go for a sales house you’d either have to be morbidly fascinated by

corporate costs or have a weak title you need to support,’ Zitter

argues.



Bob Wootton, the Incorporated Society of British Advertisers’ director

of media services, says that he’ll reserve judgment until he sees the

details. But he has a warning: ‘If we see any evidence of uncompetitive

practices beginning to emerge, ISBA will not hesitate to make official

representations to the relevant bodies. At this stage we are cautious,

but not overly concerned. It is true that there are now only five sales

points in the national press, but revenues are pretty evenly distributed

across those points. Our main concern would be if one of those points

had a dominant market share.



‘I can’t see that this will necessarily trigger the emergence of other

sales houses - there are no obviously weak players in the market. But

this adds another level of hierarchy to the newspaper business and could

help to broaden the divisions between the various camps. If so, that

would be disappointing.’



Some advertisers fear the prospect of an increase in conditional

selling. A survey published last week by Media Audits showed that

clients are far more concerned about - and have more experience of -

this issue than they would ever admit to in public.



John Storey, the managing director of Media Audits, says: ‘They don’t

like to talk about it in public because they may believe they are being

offered an inside deal - a hidden benefit. I think it should be a far

more public issue, and that may start to happen now. Advertisers will

look at this latest development and start to think about what would

happen if the Mail, the Times and the Sun were all in one sales house,

and then they may start to imagine the situation if that was extended to

include BSkyB. I think we’re bound to see more sales houses emerge and

the logical implication is that we will see more conditional selling.

Advertisers are bound to be concerned about that.’



Jim Marshall, the managing director of the Media Centre, disagrees:

‘This is the way of the world. As on our side of the fence, you have to

be big and reasonably resourced to compete in the market and achieve

economies of scale. People think that sales houses have to be large,

amorphous, faceless organisations, but they don’t have to be that way.

Ultimately, the success of a sales operation is down to its staffing and

whether it’s good, bad or indifferent.



‘I don’t think we will automatically see other newspaper groups

following suit. I don’t think that’s really the point. This is about how

changes in ownership - in this case, MAI’s involvement with the Express

- have an impact right the way down to sales arrangements. That’s what

will drive changes in the future.’



Marshall adds: ‘Advertisers will look at this with a good deal of

interest, but I don’t think they should be worried about conditional

selling. You have to be in a position of power to do that. There are

plenty of alternatives to the Telegraph and, though the middle market is

less congested, the Express group’s titles face pretty decent

competition, to say the least. Sales houses are not set up with the

Machiavellian agenda of punishing clients.’



Headliner and Perspective, p19



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