Since 1997, when the unbundling-media revolution commenced in India (Carat can rightly take credit for driving the market in that direction), consolidation has increased at a rapid fire pace. The two largest groups worldwide, WPP and IPG garner a total billing of almost 50 per cent in India. Mindshare is the union of media operations of WPP agencies – JWT, O&M and Contract. Media Edge (DY&R Rediffusion), though owned by WPP, is currently operating independently of Mindshare. Media specialists under the IPG umbrella include Universal McCann, Initiative Media and Lodestar. Not to mention another conglomerate – the Omnicom combine (TBWA Anthem, Mudra-DDB Needham, R K Swamy-BBDO) and the Starcom (Leo Burnett) network. The total turnover of media specialists is in the region of Rs 4000 crore (excluding HLL), which is almost 50 per cent of the market. Which leaves another 50 per cent more to be tapped. Hence the opportunity is there for all media buying and planning agencies to optimize on the gains. Enough reason for every media agency to eye this market.

Ever since Mindshare has made its entry in India, several questions have been raised regarding the implications of media consolidation. Given the consolidated giants’ efforts to build a strong presence in India, manifold questions have been raised in the industry. Will the current media scenario lead to far reaching changes in the advertising industry? Will it bring a further deterioration in media rates? Will the buying strength of media agencies increase and that of media owners decline ultimately? There are no black and white answers.

Where consolidated houses are concerned, for every benefit there is a problem, both for media buyers as well as media owners.

Media Buyers: Do they call the shots?
A look at some obvious implications.

* A large consolidated media buying house will attempt to leverage their larger volumes. Unfortunately, very often Clients do not benefit from this pooling of buying. Media owners therefore push for Client specific rates. Most strong media owners will be happy to offer client specific deals and discounts but fight shy from the agency deal. Smart clients have realised this and know that their rates are a function of how much they spend on a particular medium and not how much their agency spends.

* Consolidation and confidentiality are contradictory terms. If an agency consolidates their spends to leverage deals, confidentiality can be an issue particularly since many large groups handle direct competitors.

* The agency can also make aggregated commitments on spends. But on the other hand, volumes can be counterproductive beyond a certain point. After all, media owners have a finite space to sell and rates keep increasing for value optimization. The better the quality of the inventory, the greater the demand for it. If a single agency has three/four clients clamouring for the same property/inventory, the media owner hikes up the price since he is aware that sales to this agency can be maxed across the agency’s client portfolio. If the volumes are large, buys may not be the most efficient.

* Fluctuations in advertiser budgets can be evened out because of the large base of advertisers. The financial year-end varies for MNCs which can be used well to support media owners through lean times. It brings flexibility in media buys across different product categories. However while a large base of advertisers may be a support occasionally, there is a great danger of conflict of advertisers’ interest. Which advertiser gets the better deal is a dilemma that remains untackled. Consider this: Advertiser A places Rs 30 lakh worth of business with a publication. Advertiser B places Rs 10 lakh worth of business with the same publication while advertiser C places business worth Rs 5 lakh. The media agency aggregates this and negotiates a rate for a volume of Rs 45 lakh. Since it is talking to a second line publication, it manages to get a good rate. The question here is why will client A with the larger business settle for the same rate (discount) as client C? Do large advertisers end up subsidizing the smaller clients? On the other hand, smaller clients are attracted to large media agencies’ since they expect the agencies to ‘leverage’ their larger volumes for better deals. What differential rates should be applied to different clients? Who decides? What guides the decision? Hence transparency and accountability is all the more imperative for consolidated media agencies.

* From the client’s point of view, merging the media activities under one large group would enable them to operate through a single window and deal with a single team instead of negotiating with different agencies. Besides value additions are easier to get and helps in getting better network deals. For media owners too, a single buyer with one window clearance facilitates early confirmations.

* The larger the base of business the more stable is the organization, and the loss of an occasional client (even sometimes a large one), while serious, is not critical to the agency’s survival. The diversity of business also attracts good talent to the company. However, on the other side of the coin, given the large size of business and therefore the resources required to run the business, quality of people may suffer. The concern here is, would a company put the best people on smaller clients or would the best talent be reserved for the large budget businesses? The very ‘quality’ of work that may have attracted smaller clients to a large media agency, may be compromised.

Media sellers: Will they relinquish?
The real poser for media owners: will media get squeezed?

* As media buyers deal with the above issues, do these by and large really have an impact on media owners? The issues for them to deal with are rates, discounts and payment on time. Non-payment from some advertisers can adversely affect those who pay on time with both the INS and IBF embargo in place. So while the media owners would manage to get their timely payments, it is the media agencies which struggle to make it happen smoothly.

* As to the big advantage that media agencies keep banking on – volumes – it does not make any difference to media owners. While media agencies have central buying, media owners do client led deals and hence have separate buying units. Thus, beyond a point, volumes cannot really be leveraged. There is a huge conflict of interests here: that of agency led deals vs client led deals. For middle and small sized media owners, the pressure will mount for agency deals and larger volumes at higher discounted prices will hit bottom lines. This could result in shakeouts and consolidation amongst media owners.

* However, top line media owners may continue to hold their own. So far, they have not shown signs of buckling to pressure of agency deals. For them, consolidated media agency is just another entity to do business with. There would be no deterioration of rate card. In fact it means centralised buying, closing big deals and doing business faster. Ultimately only if the advertiser, agency and media owner work together, there is a win-win situation for all.

* Having said this, the situation today is extremely fluid. Media owners, Clients and Media service providers are all involved in an intricate, involved dance. Is it the dance of creation or the dance of destruction? Only time will tell.