Sponsor (Sept-Dec 1957)

Many of the current agency mergers provide new regional offices for large agencies. The result: Spot buying can be localized ami strength i<>r their operation. Sometimes the requirements of the t\ era have been apparent on the surface; other times they're submerged. But here's whj main top agency executives consider tv a stimulus for main recenl mergers and for mergers predicted for the next few years: 1. Television dictates bigness. It tends to favor both the large-budget advertiser and the large agency because of the size of initial tv investments and the enormous cost to the agenc\ of handling t\ lulling. Its becoming harder for a moderatesize agency to staff a complete tv department. Above all. the smaller agencv has difficulty attracting the caliber of man to head up its t\ operation who can handle top-level programing negotiations. 2. More than with other media, agency bigness tends to give a bargaining leverage in network negotiations. The agency with control of a "top 10" show will get a warmer reception from networks than an agency without such an ace up its sleeve. Then. too. control of a lot of network business will help an agency amortize the cost of high-salaried talent in its tv department. The tv head of a S50 million agency is likely to be as competent and well-paid as the tv v.p. of a $150 million a»enc\ : but he's IIIIIIIIIIIEIIII HOW TV ENCOURAGES MERGERS Tv accounts require many high-salaried tv specialist? -within the agency. A top agency tv head may earn more than the principals in a moderate-size shop, causing difficulty for smaller agency to staff adequately for tv clients. Also, smaller agencies have difficulty in attracting the caliber department head to do network negotiating. Big tv billings tend to give agencies a bargaining leverage both in network and programing negotiations. Hence, the more top network shows an agency has, the better it can attract and represent other tv accounts in network buys. Besides, it's network billing that tend to amortize cost of operating expensive tv department-. Spot tv requires extensive local servicing. Many agencies find that they should have men in key areas, rather than buying out of one city alone. This need for regional offices to arrange good schedules and merchandising follow-through with better station contact is prompting mergers of big agencies with small local shops. Tv clients make more demands for such collateral services as marketing, merchandising and research, but the small operation finds these too costly to maintain on staff. The smaller the agency, the bigger the percentage of billing that goes into services. Tv has increased cost of non-creative departments like accounting as well. Big national budgets anil tougher sale climate has pushed agencies into developing stronger tie-in with client sale force. distributors and local dealer-. To maintain this contact on day-today basis, many big agencies have opened new regional office-. Setting up office can be more costly, time-consuming than merger-. 1IIIIIIIIUI!!IIIII!II:: 32 costing the smaller agencv a larger percentage of billings and profits. 3. Spot tv is a medium demanding local care and servicing. The amounts of advertiser dollars pouring into stations on a spot basis are so sizable that the agency cannot gamble. There's need for detailed market and audience knowledge and close contact between buyer and station management for top scheduling and good merchandising follow-through. This has been a factor in stimulating the opening of more regional agency offices. Says Robert Durham, a "merger doctor" who has had such top-level positions as head of K&E's new business department: "A national tv account naturally wants New l ork and Los Angeles representation. You can't buy network tv sitting in Milwaukee. But. if you're a national agency, you need regional shops for carrying through effective spot tv campaigns." There are several examples of recent mergers where the matter of a regional office was a prime consideration. As Jack Cunningham, president of Cunningham & Walsh, puts it (referring to the agency's December 1956 merger with Brisacher. Wheeler & Staff. San Francisco I : "The consolidation was the result of an entirely new plan of agency operation designed to meet the changing demands that advertisers are placing on agencies. Advertisers are requiring from agencies a country-wide knowledge of local and regional marketing and cross-country ability to provide the client with all important agencv services." 4. Tv clients* demands for more and more collateral services are raising agency cost of operation to the straining point, particularly for the smaller shop. John Orr Young, retired co-founder of Y&R, who is a prominent merger consultant, sees this trend as a predominant merger cause. "The high cost of non-creative functions.'" he told SPONSOR, "is putting the squeeze on smaller agencies. But to compete in handling national accounts they must provide marketing and research and merchandising. Obviously if the small agency can get bigger, a smaller percentage of its dollars will go into both collateral sen it es and non-creative departments." The so-called non-creative departments that have had to increase in size SPONSOR • 21 SEPTEMBER 1957