Did the media planners cause the death of multimedia deals by demanding too much specificity?
Does the changing of the guard at AOL Time Warner and Vivendi Universal recently mean that the cross media deal is dead?
Lots of questions and nobody seems to have any answers. But that’s why we’re here, to take a shot at it.
First: Why are cross media, multimedia, strategic alliances (or whatever you want to call them) made? There are a lot of different agendas. And many times, the buyer and the seller have different agendas. Let’s look at the two of them:
Seller agenda: I am a media conglomerate with a lot of different types of media vehicles. I want to make big deals with big companies. They are buying a lot of our stuff anyway and it would be nice to get a larger share of their overall budget. Maybe I could extend into some other properties that they are not buying. Ideally this media company has something in video (a TV network, some cable entities), something on the Web (a major Web presence) and something in magazines. Other media such as radio, newspapers and out-of-home might be considered as add-ons to such a deal, but they are not going to be the primary drivers.
Buyer agenda: Media planning has become increasingly significant. And while major brands are involved with many different media, few brands can afford to be in every possible medium. And there are specific vehicles within each medium that have priority for the buyer based on media planning parameters such as product/service usage habits, strategic target audience, lifestyle timing, geography, etc. A planner works hard to provide parameters for the buyer to take into account in negotiation. The reality is that some inventory will not make sense within some strategies at any price. And other inventory needs to be priced much more advantageously than a seller will want to price it for inclusion in the media mix. We’d love to make some big deals for what we want to buy at lower prices. But we don’t want to take on a lot of inventory that does not make sense for us.
Recently, there have been big cross media deals made (OMD and Disney stands out). The question with a deal like this will be whether both sides can stay happy enough to renew after the first year. (Remember that in the first years of Web strategic alliance deals, over 90% of these deals were not renewed, according to Iconocast.) And, if one is to believe the press, AOL Time Warner and Vivendi Universal non-performance in this arena is contributory to their current corporate troubles.
It is interesting that in the face of a massive market downturn, individuals have been called to account for not personally making their company successful where others have failed. One of the issues with the big cross media deals is that each of the media tend to be in a different profit center and some of them may want to make a specific deal more than others based on their perspective and their relationship with the client or agency involved. This is further complicated by the fact that few individuals have experience in selling all of the media involved in such a deal, thus each specialist must be involved and trusted to do the right thing for their own medium.
It is fairly easy to document the mainstream media value in these deals at current valuation. But as they are longer-term deals for the most part (at least one year in length), the cost valuation becomes harder and harder to do the further out you go. So, even if the entire inventory offered matches up to the plan (and it seldom does), the question then becomes one of predicting future pricing parameters.
Also from a buyer’s perspective, the recent upfront did little to establish that the bigger guys could do a better job. In fact, our discussions with those knowledgeable in the marketplace indicate that some big media companies moved too slowly and were left with their clients’ money in their pockets when the market closed. And there does not seem to have been success at the really big entities in cutting even part of a percentage off of the final deal with their combined clout.
Then there is the question of specificity. The bigger the deal, the less you can put specific brands, timing or media inventory into the deal. It must be left more general to be executed as brand budgets are allocated. So, even if the deal is major for both, the good faith of those making the deal will be tested again and again at the execution stage as those implementing for the brands attempt to mold the availabilities from the corporate deal to their brand goals.
So, where does this leave us? We believe that this arena will continue to be in flux and experimental. The industry will watch the deals that have been made with great interest to see if renewals are made. We DO think that there is a future for these deals. But we definitely need better analytical tools to evaluate the appropriateness of the media, sales promotion and other aspects of the deals to quantify their contribution to brand ROI. And the experiments that continue at $1B or so per pop? People will continue to bet their careers and their company future on them. Let’s hope that the process gets further refined before there is too much more road kill on the highway.