Media: All about ... TV ad sales house consolidation

Sky and MTV Networks' deal may spark similar activity.

Back in June, Campaign published a piece about Nick Milligan, the managing director of Sky Media, "putting the band back together again". The "band" in question being the group of television sales directors who used to "play" together back in the good old days of Thames TV.

Characters including Five's Mark White and Kelly Williams, and Nick Bampton, the Viacom Brand Solutions managing director, we speculated, might be rejoining Milligan to lead a third sales house built from the scattering of the smaller terrestrial and multichannel sales operations to rival the power of ITV and Channel 4.

The theory made sense because the market was rife with speculation that Contract Rights Renewal would be relaxed, affording ITV greater clout in the market. However, nothing immediately changed because a decision on CRR was fudged (we're still waiting for the ultimate Competition Commission statement but it's unlikely to be removed in its entirety).

This seemed to put sales house consolidation on the back burner, because talks between Sky and Channel 4, over a possible sales merger, also stalled.

Last week, however, the consolidation process kicked into life with Sky announcing a deal with MTV Networks that will see the closure of MTV's Viacom Brand Solutions operations and Sky taking on ad sales representation on behalf of ten MTV channels, including Nickelodeon and Comedy Central covering a five-year period from 1 January.

A triumph for Milligan who, following a recent deal to renew Sky's ad sales representation for Discovery Networks, seems intent on sweeping up sales contracts from smaller multichannel players to build this third sales house alternative to ITV and C4.

While reports suggest that Sky's bid for Virgin Media Television (which includes the sales house ids) has stalled, there may be other, more imminent deals, in the offing. That said, the old Thames band may be some way from reforming because it seems unlikely that Bampton will be joining Sky Media following completion of the deal.

1. VBS started up in January 2001 when MTV brought sales for its channels in-house. Ironically, Sky had handled sales for channels such as Paramount Comedy and Nickelodeon before the creation of VBS. Initially led by Paul Curtis, who went on to become Milligan's deputy at Sky before leaving this year to head sales at NBC Universal, VBS built up a head of steam under Bampton, who replaced Curtis in late 2004. Its share of total TV advertising was just 2.7 per cent in 2008, amounting to some £89 million. However, VBS punches above its weight in terms of sponsorships and creative solutions for advertisers. This has earned it the title of Campaign's TV Sales Team of the Year for the past three years running. Described as "proactive and innovative" by agencies, VBS's pioneering initiatives include "force for good", which saw it double airtime for campaigns such as the Metropolitan Police's anti-knife crime activity. It also has a disproportionate share of 16-34 impacts (6.7 per cent rising to 7 per cent this year), which will be attractive to Sky (taking it to more than 20 per cent of 16-34 impacts).

2. Sky is gradually growing its position in the TV sales market. In 2008 it built a share of TV advertising of 13 per cent, which is expected to increase to 13.9 per cent in 2009, representing some £405 million in revenue, before the VBS deal is factored in.

3. VBS will be wound down following the deal and its 80-strong team is expected to transfer to Sky Media under TUPE regulations. It will then fall to Milligan and his team to integrate its people with Sky's own sales team of 200. It remains unclear how many of the VBS team will be retained and its leader, Bampton, is expected to consider other options as well as anything Sky might put on the table. While some media buyers say that the two have vastly opposing cultures, VBS's creative teams could prove to be a strong asset for Sky Media.

4. MTV argues that the deal will allow its ten music and entertainment channels, including the recently launched Viva, to take advantage of Sky Media innovations, such as green-button advertising and its targeted advertising service, Sky AdSmart, due to launch in 2011. The deal also sees MTV extend its carriage deal with Sky to cover Sky's Direct-to-Home and Sky Player platforms.

WHAT IT MEANS FOR ...

MTV

- The deal seems to be about cost-cutting for MTV Networks, which will lose the overhead of its own sales operation while still bringing in substantial ad revenues.

- Its UK managing director, David Lynn, claims that Sky Media's greater scale will help it to "develop more innovative and engaging advertising solutions".

- Lynn also argues that the deal "will allow us to invest more in making content for our channels".

SKY

- The deal will give Sky Media an enlarged share of total TV advertising and boost its share of 16-34 impacts to above 20 per cent while, potentially, tapping into VBS's heritage of "creative" work with brands such as Nickelodeon and Comedy Central.

- It could also create momentum for consolidation in the market that puts Sky Media at the centre of any future deals. Though a merger with C4 sales seems, in the short term, unlikely, talks between Sky and other multichannel broadcasters over sales representations are expected.

ADVERTISERS

- While VBS is small in terms of share and the deal doesn't raise competition concerns, agencies worry that some of the creative sparkle that characterised the VBS approach will be missed from the market.

- Agencies also worry that the creative, collaborative, VBS culture will be totally lost.

- One broadcast director says: "I'm concerned about losing VBS's influence and positioning in the market in, say, two years' time."

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