Continuing with its theme that bigger must be better when it comes to media planning and buying, WPP Group is once again consolidating components of its massive media services organization to dominate an important, emerging market. That market, ironically is one of the oldest forms of advertising media - out-of-home - which is expanding rapidly as it becomes infused by new digital technologies, measurement systems and new place-based venues, which have analysts projecting it will be one of the fastest growing sectors over the next several years. Another big driver is the fact that marketers are growing nervous about their ability to deliver ads through conventional electronic media like TV and radio as consumers gain control via new media technologies. By contrast, out-of-home - whether it's on billboards, in cinema, elevators or even retail-based media networks - is looking like a surer bet for reaching "captive" audiences. That fact has not escaped the major agency holding companies, which have been reinvesting and restructuring their outdoor media assets in an effort to grab share in what is projected to be a rapidly rising market. A report released this week by Publicis' ZenithOptimedia Group, for example, revised overall ad spending downward, but increases the outlook for online digital media and out-of-home. A survey conducted by the American Association of Advertising Agencies earlier this year projected out-of-home would be the hottest ad medium in 2005 - surpassing everything except for online and branded content - among the AAAA's membership. Those facts apparently have not escaped WPP chief Sir Martin Sorrell, who has been talking up the value and role of out-of-home, and who on Monday announced a restructuring that would combine the outdoor media operations of Mediaedge:cia and MindShare with leading out-of-home media company Poster Publicity to form a new entity: Kinetic. The new unit, which WPP claims to be the largest in North American and most likely the largest in the world, will be headed by John Miller, a long-time WPP outdoor media vet, who most recently was managing partner for out-of-home media at Mediaedge:cia. Miller will serve as chairman of Kinetic, while Steve Ridley, former president at Poster Publicity, was named CEO. With offices in New York and Miami, Kinetic will start with 26 employees and $350 million in billings in North America. By the end of the year, the unit expects to double its size in North America, which ironically is an under-leveraged out-of-home media market. "In the U.S., it's a 3 percent medium at best," concedes Miller, referring to the percentage of U.S. advertising budgets out-of-home media typically gets. ZenithOptimedia estimates out-of-home currently represents 5.4 percent of ad spending worldwide. "I think the real question is why is it so big elsewhere. And that might be because other countries have spent the time and money to develop better research about the medium works and because they put better creative resources behind it," says Kinetic's Miller, noting that the U.S. is poised for change. Among other things, the U.S. is leap-frogging the outdoor media research process. Nielsen Media Research is deploying and Arbitron is researching new methods for measuring the demographic composition of out-of-home media utilizing state-of-the-art global positioning satellite technologies, and the Traffic Audit Bureau is fielding new research on so-called "visually adjusted indexes" (VAI), which advertisers and agencies could use to factor actual exposure to out-of-home ads. Miller says the U.S. still has a long way to go vis a vis creative services, but he noted that Kinetic has its own creative staff and plans to grow that in an effort to craft better out-of-home advertising messages. The restructuring is the second major media services reorganization by WPP this year. Earlier, it consolidated the digital interactive and direct marketing operations of its media services agencies into a new consolidated play dubbed Outrider. Some observers expect WPP to consolidate media services further, though it already has Group M, a holding company level unit that oversees all of its operations. Meanwhile, Miller estimates Kinetics global media billings to be about $2 billion, and projects it will grow by another $1 billion within a year, through a combination of "organic growth," acquisitions and consolidation with other WPP units. That, he says, would make Kinetic the world's largest out-of-home media buyer, surpassing Aegis Group's Posterscope, Omnicom's Outdoor Media Group, Interpublic's Outdoor Services unit, and Publicis' outdoor media operations.
More than a decade after it squandered its first foray online - the first of any major media conglomerate - News Corp. is once again betting big on online media, announcing a deal Monday to acquire Intermix Media Inc. for $580 million in cash. Intermix, which operates the wildly popular social networking Web site MySpace and about 30 other Web destinations, has made inroads in drawing both the precious youth market and advertisers. The timing of the deal is interesting for News Corp. in general and MySpace in particular. The deal comes 12 years after News Corp. bet big and failed with its first online strategy, and has been licking its digital wounds ever since. In 1993, it acquired Delphi Internet Services Corp., one of the world's first consumer Internet service providers. But News Corp. failed to formulate an integrated online strategy, squandering the opportunity as Delphi was passed by other emerging online services such as America Online, CompuServe, and Prodigy. News Corp. isn't the only major media conglomerate to make an ill-timed bet online. Walt Disney Co. bet big when it acquired early popular search engine Infoseek, which ultimately was merged into Disney's online services. And, of course, Time Warner, merged with America Online, became dominated by an online strategy, before it regained its footing as a broad-based media and entertainment concern. Now Time Warner is once again looking to AOL to fuel its growth. Mainly, big media companies like News Corp., Disney, Time Warner, and Viacom, have looked online as a way of extending their traditional media brand franchises and to help promote their usage. News Corp.'s acquisition of Intermix looks to be a genuine diversification play into the rapidly growing area of social networking. Nielsen//NetRatings' AdRelevance unit reported last week that MySpace beat out heavyweights MSN Hotmail and Yahoo! Mail as the leading site for advertisers to promote their wares in June, with a 7.9 percent share of ad impressions. Advertisers include Procter & Gamble and Sony Pictures. Additionally, MySpace.com currently dominates other social-networking sites on the Web, with 84.46 percent of the market for the week ending May 21, according to research firm Hitwise. The deal represents one of many recent buyouts of Internet companies by traditional media players. For instance, earlier this year, Dow Jones & Co. purchased MarketWatch for $519 million, and New York Times Co. bought About.com from Primedia for $410 million. Intermix, which said it had exercised its option to buy the 47 percent of MySpace.com it doesn't already own, will become part of News Corp.'s new Fox Interactive Media unit. The addition of Intermix's 27 million monthly users will more than double Fox Interactive's online audience. Richard Rosenblatt, Intermix Media's chief executive officer, and Chris DeWolfe, chief executive officer of MySpace.com, will retain their jobs when the acquisition is completed. A company representative said MySpace had no plans to change under new management. "MySpace will continue to create new ways to connect people online and to maintain a unique environment where our users can creatively express themselves," a spokeswoman said in a statement. "With this acquisition, MySpace will be able to accelerate its growth plans and expand into new markets." In April, Intermix became the target of New York Attorney General Eliot Spitzer and his quest to curb spyware. Spitzer sued Intermix for spreading ad-serving programs without consumers' consent, along with the games and screensavers available on its sites. Intermix said it had stopped distributing programs mentioned in the lawsuit, but in June agreed to pay just over $7 million to settle the charges without admitting any wrongdoing.
TV advertising sales of NBC Winter Olympics in Torino, Italy are somewhat slow, according to media buying executives. NBC has 75% sold of its goal of just over $800 million. "I would think they are behind," said one veteran media agency buying executive who is close to buying a Winter Olympics package. A slower overall TV advertising market and a big Olympic price tag for advertisers are taking their toll, according to media agency executives. In addition, advertisers are now asked to buy a lot more commercial time across all NBC Universal networks. "It's not like in the old days when there was just NBC to buy," said Larry Novenstern, senior vp and director of national broadcast for Deutsch Inc. "They have a lot more inventory to sell on their cable networks. They are actively selling right now." This would be a continuation of NBC's most recent advertising sales concerns: In the upfront advertising market just completed, the network dropped to $1.9 billion--about a billion dollars less sold than in the upfront market of a year ago. An NBC spokesman would only say that advertising sales for the Olympics are on pace--but would not disclose any specifics. Before the upfront market started in May, media buying executives expected that NBC might try to package the Winter Olympics with its prime-time programming to prop up prime-time pricing. But buyers said that didn't happen. "They sold nothing in the upfront [for the Olympics], which was a little bit surprising," said Tim Spengler, executive vp and director of national broadcast for Initiative Media. "They don't discount the Olympics." NBC is offering a 15 to 16 rating guarantee for the Torino Olympics, say media buying executives. NBC Olympic prime-time programming is priced at around $675,000 a unit. Media executives say NBC is scouring agencies for small $5 million to $8 million budgets from advertisers. NBC has already re-upped many of its incumbent advertisers, which are also International Olympic Committee sponsors--McDonald's, Coca-Cola, Visa, General Electric, Kodak, Samsung, and others--and has made TV deals in packages priced from $25 million to $50 million. One media buyer complained that NBC packages perhaps too many cable spots into deals: "It's a small percentage of your overall dollars, but a huge percentage of your overall units--about 50%." Sports in general has been getting strong pricing on TV--such as the NFL--say media executives. But the Winter Olympics aren't benefiting here. "It's priced at a premium, and it's not in the fourth quarter," said Initiative's Spengler. "Fourth-quarter sports are strong." Torino's rating guarantee is just about the same that NBC offered for the 2002 Salt Lake City Olympics, which exceeded expectations by over-delivering on its ratings promise by 18% to a 19.2 average rating. NBC pulled in about $740 million in advertising sales, and gave the network a $75 million profit. NBC spent $545 million for those rights, as well as spending millions on TV production. By contrast, NBC paid about $614 million for the rights in Torino.
Ever-increasing consumer interest, new programming, agreements with the automotive industry, and a relatively low turnover and drop-out rate for subscribers will help lift the number of satellite radio subscriptions to 46.8 million and yearly revenue to $7.6 billion by 2014, California-based Kagan Research said in a report this week. Driven by decisions such as Hyundai's to factory-install XM radios in 100% of its new vehicles, Kagan opines that the country's largest satellite radio provider will achieve positive cash flow by 2007, while Sirius, its competitor, will likely take until 2008 to do so. The two providers, XM and Sirius, currently dominate satellite radio in the United States. Although XM is the older of the two, Sirius has been steadily gaining ground--with its listener share climbing from 11% in 2003 to 26% in 2004, and expected to edge near 33% by the end of this year. XM currently has a total of over 150 Digital Channels, with 67 commercial free music channels included in the total, while Sirius has over 130 Digital Channels in total, including 65 commercial free music channels. "Clearly, they've done a very good job of marketing their product and creating a buzz around the industry," said Michael Buckley, a senior analyst with Kagan. Some industry observers, however, opt for a more cautious forecast. "Not just with satellite radio, but any technology, there's a need for the consumer to see the value in a product, not just the early adopters," says Leo Kivijarv, Vice President at PQ Media in Stamford, Connecticut. "Consumers must see a need to have that technology." Noting that of some $300 million in revenue the satellite radio industry generated in 2004, only $9 million came from advertising, Kivijarv and others believe that the industry will need to resolve the contradiction between its monetary needs and ostensibly ad-free service. One idea that some industry insiders have floated is that of two types of subscriptions to satellite radio--a more costly one that would forgo advertising entirely, and a more modestly priced option that would allow some level of ads to appear.
Set to compete with the established Black Entertainment Television (BET) and relative newcomer TV One, a new 24-hour channel focusing on news and entertainment from the African continent, The Africa Channel, will be ready to launch by the third quarter of 2005, its president said on Monday. The channel hopes to provide a voice and image in the United States for the little-covered region. Partnered with Atlanta-based Cox Communications Inc. and supported by entities such as former United States Ambassador Andrew Young's company Goodworks International and individuals such as the National Basketball Association (NBA) players Dikembe Mutombo (born in Congo) and Theo Ratliff, the station, with offices in Los Angeles and Johannesburg, hopes to take bring a broad swath of African creativity to the United States, its executives said. "The infrastructure for most of the daily television fare is most mature in South Africa (for our purposes); a lot of producers and directors in South Africa have cut their teeth in America and gone back to work there," said Jacob Arback, The Africa Channel's President and a co-founder. "The feature films and cultural segments, however, are going to come from all over the continent." Among the channel's programming will be the investigative reporting series "Carte Blanche Africa" and two soap operas, "Generations" and "Isidingo." With the now 25-year-old BET pulling in an estimated 79 million viewers and TV One (launched in January 2004) drawing 29.5 million according to the Cabletelevision Advertising Bureau, the Africa Channel says it looks forward to appealing to much the same market, but with a very distinct point of view. "We think we're complementary (with BET and TV 1)," says Arback. "We're a very inclusive network with an appeal to a core audience--African-American, of course--but from an African perspective."