WPP warns of spiralling TV costs

The rising cost of advertising on network television is forcing more clients to consider alternative media, according to Martin Sorrell, chief executive of the WPP Group.

The rising cost of advertising on network television is forcing

more clients to consider alternative media, according to Martin Sorrell,

chief executive of the WPP Group.



In a statement detailing record profits for WPP in the year to 31

December 1997, Sorrell took a swipe at the ’oligopoly of media owners’

who have forced up the real cost of network television by as much as 10

per cent per year in both the UK and US.



’As long as network price inflation continues, clients will increasingly

experiment with alternative media,’ he said. However, Sorrell added that

the increase posed an opportunity for agencies. ’If companies like

Procter & Gamble are spending pounds 3 billion on advertising, they will

be looking to their agencies for how to spend it.’



WPP’s results, which were released on Tuesday, caused a 12.5p leap in

its share price by the end of the day. Turnover was up 2.9 per cent to

pounds 7.3 billion and pre-tax profits rose 16 per cent to pounds 177.4

million. Combined advertising revenues at J. Walter Thompson and Ogilvy

& Mather Worldwide rose by 9.3 per cent.



Sorrell said rising TV costs were one reason why revenues in core

advertising operations had grown more slowly than the double-digit

figures posted by WPP’s information and consultancy, public relations

and specialist communications companies.



He observed that there was still an opportunity to improve margins as

WPP trailed behind rivals such as Interpublic and Omnicom. These had

operating margins of 13-15 per cent, compared with a WPP margin of 11.8

per cent.



Sorrell predicted that the Pacific Rim advertising market would grow by

nearly 10 per cent this year in spite of the area’s economic turmoil.



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