Controversy Swirls Around Disney's Multibillion-Dollar Ad Review
- by Larissa Faw , October 7, 2019
Disney's highly competitive, much anticipated $1 billion agency review is nearing its end. Disney is set to announce the big winners before October 11.
Sources tell MediaPost's Agency Daily that Dentsu Aegis Network and Omnicom -- each currently overseeing Disney-related accounts -- are the frontrunners, while Publicis Groupe is likely to pick up some of the smaller accounts.
The Groupe was not among the finalists for either the studio or network businesses, insiders report.
WPP withdrew from the MediaLink-led review because of a conflict with its client and Disney rival Comcast.
The new agency partner is set to begin servicing the accounts in January. All agencies now on Disney's roster are operating on a 90-day contract.
However, high-ranking insiders close to the Disney review are noting what they call unethical financial terms required by the company in order to land this business. (These executives are not directly involved with servicing this account and are raising their concerns before the official announcement to avoid criticisms of bitterness or revenge.)
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It appears there are three main financial easements that Disney is seeking from its new agency partner.
While Disney has requested the now-standard reduction in agency fees and asked agencies to take a larger share than what is typical in terms of media discounts, Disney's third reported requirement is angering those who are familiar with the pitch. They believe Disney is exploiting its power and strength in an unethical way.
They also want to shine a spotlight on what they feel is Adland's hypocrisy. Holding companies and agencies are consistently under the spotlight over transparency and ethical issues, yet clients are not held to the same scrutiny, one ad executive gripes.
At issue is Disney's request that the winning holding company require the agencies' other clients to allocate what is being called a "share shift" — to spend more of their respective ad budgets on Disney properties. This means that if client carmaker X spent 20% on Disney channels this year, the media spend would now rise to, say, 23% in 2020.
Sources say at least two holding companies outright refused to consider this request, but one network allegedly did concede to these terms — if it was appointed agency partner. (While Disney's request may have been an aggressive attempt to wield power, it remains to be seen how the company could even audit and ensure these demands were met.)
Disney's financial requests may raise ethical and transparency concerns, but are not considered illegal, since it appears these discussions are rooted more in speculative rather than specific language.
Disney can request that the media-buying agency give "special consideration" to Disney platforms when talking with other clients.
"Media agencies are giants with massive clients that can have strong input regarding where to put their funds, so on the surface the reports of that request do not seem credible to me," says Gene Del Vecchio, adjunct professor of marketing, USC Marshall School of Business, and author of Creating Blockbusters.
"In fact, the media agencies would be unlikely to meet that criteria given the nature of their other clients' size and needs," he adds.
Furthermore, holding companies would be at risk legally if they did not get permission from their other clients first, in order to make that commitment, one lawyer adds.
While it's possible that Disney floated this share-shift client mandate to see how far it could push the parameters of a new agency partner, it does serve as an illuminating, but troubling, example of issues faced by agency leaders.
Laurie, there's one thing I don't get. You say that Disney wants agencies to take a higher than usual share on media discounts. Any idea what that means? Is Disney asking agencies to squeeze media sellers it buys time or space from in behalf of Disney and keep the "savings"? Or something else?
Hi Ed. Indeed you are accurate in your assessment. Disney is pushing agencies to squeeze as much as it can from them to receive their services. It leverages one of Disney's favorite words: synergy.
Honestly, if I were Disney I would do that in a New York minute. And if I were a holding company, I would walk away in the same time.
Imagine the following scenario: Disney improves its audience ratings across the board. Naturally, XYZ Media would begin shifting some of the budget to better-performing media, right? But then you get sued by ABC Client for doing that because you are doing it to have won the Disney Media. Now you are in a lose/lose situation!
1. If the shift was good, meaning, reacting to improved audience delivery, you have to go through a lengthy process to prove it to ABC Client.
2. If the shift was not that good, you get sued by ABC Client.
Looks like a coming train crash to me!
Nice points Marcelo. Maybe the real winners are lawyers....
Once again, the focus is on cost of media and cost of service, where is stategic thinking in the decision making process? And what about the hypocrisy of demanding the winner extract media savings from sellers. Do the Disney media properties agree to reduce pricing when other agencies win new assignments and the client has required reduced pricing?
Are we in a vicious cycle?
Marc, I wonder how the "winning" agency will explain to its clients that they must spend more on Disney media properties as part of a deal to get the Disney media promotion account. I also wonder if part of the deal contains a proviso that requires Disney to come up with competitively attractive CPMs relative to other media in order to justify a higher share of spending. Yep, it's the bginning of a new era for sure---but I doubt that it will be put into practice without causing major issues about trust---something that responsinble ad agencies don't need more of right now.
Ed,
Trust and transparency, the later a key ANA, call out. It’s both sad and surprising that an agency would agree to potentially compromise existing clients. And equally sad and surprising that a respected corporation and media owner would ask agencies to place themselves in an awkward position as part of the pitch and potentially part of the their decision making process. I applaud those who said “no” and maintained their integrity. This is a dangerous “rabbit hole” as ownership consolidation continues. How are the hundreds of advertisers protected if this kind of demand is not rejected by media agencies?
Marc - other advertisers are protected by the threat of major lawsuits. It is going to be rough for whomever "wins" the business.
Here's another question for readers: what role do the review moderators, in this case, MediaLink, play? Shouldn't they try to hold each side to high ethical and transparency guidelines?
I'll take a stab at it Larisa. I am sure that MediaLink has warned them as much as they can. Michael Kassan is an old-timer and has been through many battles and two of their board members, Dana Anderson and Jeff Lupinaci I know in person and they are very professional.
However...
MediaLink is not their daddy and they are not there to make sure that companies "behave"; Disney is run by very professional people and so are the groups. Everyone is walking into this pitch with their eyes wide open and there is only so much that MediaLink can do before Disney tells them to make sure their butt is not caught by the door on their way out.