It all started in November 2004. The European trade press was suddenly announcing the forthcoming merger of the buying sections of the media agencies OMD, ZenithOptimedia and tkmStarcom. The joint venture, to be named Merlion, was slated to launch on 1 January 2005. With billings of EUR4 billion, Merlion would be the second-largest media buying giant, behind WPP. WPP now accounts for around 40 per cent of the German media market.
Merlion, were it operating now, would account for 25 per cent.
There are a number of reasons why OMD, ZenithOptimedia and tkmStarcom haven't formally started buying together yet. Despite the buying agreement between the agencies, they clearly remain fiercely competitive. The agreement only concerns buying, not planning, and conditions have to be agreed in order to avoid client conflicts - difficult, but the experience of other, similar buying co-operatives has shown that it is not impossible.
More difficult to negotiate is the Federal Cartel Office, which, when it ruled on the merger, caused considerable confusion by green-lighting it one day and calling it off the next. The merger remains on hold.
The difficulty the FCO faces is that there are two dimensions to the case - the legislation of amalgamation, and the FCO's field of cartel legislation. The organisation is worried that the merger might result in too much money being handled by too few businesses.
As of March 2005, the agencies have seemingly backed out of their plan, but they have not abandoned it altogether. The FCO has asked the agencies to satisfy it on a number of additional questions before it rules again.
The question remains, if Merlion is sanctioned by the FCO, what changes will its arrival cause in the German media market? Speaking personally, I think the effect will be slight. The concentration of buying power is simply following a general trend in Germany's media market. As far as media providers are concerned, the power is already concentrated: there are only two big TV marketers, two radio marketers, one for cinema, only a few big players in outdoor and very few in print that play an important role. What is happening with media agencies is a continuation of the same story - agglomeration is a natural trend. It is also a reaction to demands from clients for better terms; that agencies are attempting to bundle their billings is a logical response.
One thing is sure, though. If Merlion does eventually come into existence, its creation will put an end to the process of concentration of buying power - the remaining players will dominate the German market in the same way that the media owners do. Meanwhile, we watch and wait.
- Dirk Wiedenmann is the chief executive of Initiative Germany.