Media Forum: Does WPP's latest buy affect UK media?

Will WPP's recent acquisition of MediaCom have much impact on the UK media market? Alasdair Reid investigates. Another chair has gone, a handful of players are left and the music is about to begin again. If things continue like this, we will end up with one advertising conglomerate talking to one hyper-mega-media owner.

WPP, say, and Time Warner-Viacom-News International-S4C-WashroomMedia Inc.

It will be like one of those Cold War-era newspaper cartoons by Edmund Valtman: two bulky Leonid Brezhnev lookalikes with bushy eyebrows staring each other down in an echoing mausoleum of a negotiating chamber.

We used to imagine this sort of scenario half in jest, but with each new round of consolidation it is looking less and less ridiculous. The outcome of the latest round of musical chairs was hardly surprising - manoeuvring has been going on for months now - but just what are the implications of WPP's acquisition of Grey and its media division, MediaCom, for the UK media market?

Kelly Clark, the chief executive of MindShare UK, expects conversations with his new colleagues at MediaCom to focus on three main issues. He explains: "The things we are always looking to accomplish are smarter solutions for clients, better opportunities where possible for the people who work within the group and ways to build on our already market-leading position. If we can accomplish those things, we'll see where it leads us."

The speculation suggests MediaCom's billings will be absorbed into Group M, WPP's group buying unit. Would that alter the balance of power in the trading market?

Mick Desmond, the chief executive of ITV Broadcasting, does not think so - the "big five" agency groups already account for a huge percentage of ITV business. He adds: "Obviously, WPP must now decide whether it is in the best interests of MediaCom's clients to bring the buying together.

We are already hearing views on both sides of the question and it depends on what your definition of value happens to be. For instance, there is no more discount to be had from the television marketplace."

In fact, Desmond believes we are approaching a watershed in the business.

As the bigger buying companies keep merging, there is a growing gap in the market for entrepreneurial start-ups to exploit.

Is that how clients see it? Do they worry that continued consolidation limits their room to manoeuvre when it comes to hiring agencies?

Peter Buchanan, the deputy chief executive of COI Communications, points out that COI uses MediaCom for its press buying, but its media roster also includes smaller outfits such as Naked and The Ingram Partnership.

"We want to select from as wide a choice of agencies as possible and they all have something to offer. For instance, we are impressed with the levels of service we get from smaller players run by established media players," he says.

Simon Thompson, the head of marketing at Honda, says that consolidation is now an accepted fact of business life. He states: "The hope is that it results in efficiencies - for instance, in sharing various back-office functions - that will result in costs coming down. Ideally, it benefits everyone. It is good for shareholders, it is good for employees who get the added stability of working for a big organisation and, hopefully, it is good for clients. Somewhere down the line, the net result is that it is good for consumers too."

But surely conflict continues to be the main worry? Not necessarily, he counters. "In any case, the really good talent pool tends to move between companies - that is as true of advertising as it is of the automotive business. That is a function of the way the world works these days," he says.

What do rivals think? Jerry Buhlmann, the chief executive of Aegis Media Europe, says he will be intrigued as to where WPP will extract value from its purchase. "It is a continuing part of WPP's growth by acquisition rather than through organic growth and I believe it will keep the two brands separate, reinforcing the silo structures WPP has always favoured.

That silo structure of competing brands means the only synergies come from cost-cutting rather than structural changes. In that respect, I'm not sure where the client benefit comes from," he states.

And he's by no means convinced conflict is an issue of diminishing importance.

He concludes: "The biggest change for WPP is that it now has more conflicts to manage. Agency groups are getting better at giving clients more confidence in their ability to maintain client confidentiality. They are starting to accept that the structures put in place are likely to work. But clients remain the only arbiters where that issue is concerned."

- "There is equilibrium in the airtime trading market. The issue therefore becomes about whether they can achieve greater operational efficiencies by bringing all the business together. In that case, clients may also want to benefit from those savings too." - Mick Desmond chief executive, ITV Broadcasting

- "We don't have the same types of conflict issues other organisations might. Where MediaCom is concerned, it will take time before we see the full implications. In the meantime, it has assured us it will be business as usual." - Peter Buchanan deputy chief executive, COI Communications

- "Some advertisers are relaxed about conflict. It is a fact of life. Automotive companies buy (things such as) tyres from the same place. There isn't a problem with that. As long as there are separate teams working on separate business, I don't have major concerns." - Simon Thompson head of marketing, Honda

- "Whatever they choose to do with MindShare and MediaCom in terms of buying, there are few implications for the media market. There is a level of scale that enables you to compete. North of that figure, it all comes down to skill and competence." - Jerry Buhlmann chief executive, Aegis Media Europe.


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