WPP's Sorrell: PVRs, Aging Population, Globalization Alter His Business Outlook

The advent of digital video recorders and their impact on media consumption patterns will change the media business, but the head of a leading agency holding company said some companies are missing an even bigger picture.

Sir Martin Sorrell, chief executive officer of WPP, said Tuesday that media consumption has already changed dramatically within the past few years. He said that his children, ages 25 to 30, don't consume media the same way he does. And Sorrell pointed out that his own media consumption habits have changed.

"I think that's the problem, and I don't think that people who run companies understand the changes," said Sorrell. He said there's a lot of talk about the convergence of advertising and entertainment - in program sponsorships, DVRs and entertainment - but very little gets done. He said that age is a factor, noting that large companies are generally run by people between the ages of 40 and 60.

Given the venue of his speech, a keynote during Tuesday's session of the "Beyond the Numbers" conference, the age reference was especially relevant. The two-day event focused on marketing opportunities involved in the aging of the Baby Boom generation. Sorrell, who was scheduled to speak on that topic, talked instead about the forces driving the advertising and media industry.



He said the so-called globalization of the world economy is really more like an Americanization. But he said American companies - who, despite the changes of the past decade or so, still do a majority of their business domestically - are going to face economic challenges from China, South America and other developing countries. He noted that based on an analysis of data released recently by Goldman Sachs, more than a third of WPP's business would come from regions beyond Europe and North America. And that's assuming current rates of growth in the countries' gross domestic products.

"That shows the power of these economies," said Sorrell.

Sorrell pointed out that WPP is moving toward a third of its business coming from North America, a third from Europe and a third from the rest of the world, primarily Asia-Pacific. It's also moving away from advertising as a major part of its business (it's already less than half of WPP's revenues) toward a mix of one-third advertising and two-thirds from specialized communications, public relations, research and the like.

Sorrell also noted that network television's growing costs will eventually move more and more dollars away from it and toward other modes of advertising, such as cable, satellite, Internet, direct and outdoor. He's noticed "increasing disenchantment" among clients with network TV.

"All of these alternative technologies will become more important," he predicted.

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