What are the chances of the BBC negotiating a decent licence fee for 2016…

August 30, 2010

… and Mark Thompson, the present director general, leading those negotiations? Much better than they were a few weeks ago.

In his much-awaited MacTaggart lecture at the Edinburgh Festival, Thompson skilfully deflected the incessant barrage of brickbats hurled at the BBC’s corporate flatulence by painting BSkyB as the real enemy of UK media plurality.

Get-back time at James Murdoch, head of News International, after his cruel gibes in last year’s lecture at the expense of the corporate bloater, of course. But more than that, Thompson has read his runes well. The times, they really are achanging.

The argument, beloved of BBC critics, that the corporation is stifling commercial competition falls to pieces once we begin to examine the success story that is BSkyB. A few deft brush marks from Thompson’s speech tell the tale well enough. Sky’s dominance is underlined by a marketing budget that is bigger than ITV’s programme budget; and subscription revenues of £4.8bn that “dwarf…all other commercial broadcasters put together.” Lurking not very far below the surface is the suggestion that in Rupert Murdoch we have a UK version of Silvio Berlusconi – owning well over 40% of our newspapers, and poised to buy out the 61% of BSkyB his organisation does not already own.

That last bit may be a bit fanciful, but there are certainly compelling elements to the Thompson narrative that argue for a strengthened rather than reduced role for the BBC. If there’s been a failure in public service plurality over the past 20 years, it’s not so much the overweening power of the BBC that has been responsible for it as the inability of the ad-funded sector – represented primarily by ITV, C4 and C5 – to build a countervailing digital subscription-driven complement to their free-to-air analogue offering. If BSkyB could do it, runs the argument, why couldn’t they? To which, once we dust down the sorry case study of ITV Digital, there is no very good riposte.

Moving on, and acknowledging the chronically weakened position of the free-to-air, ad-funded sector, there seems little sensible alternative to recognising a new balance of power if broadcast plurality is to be maintained. Unpalatable as it may seem to people at ITV, the BBC is now the best bastion it’s got against further encroachment from Sky – along the lines of the enemy of my enemy is my friend.

Thompson’s specific proposal – that Sky should pay the ad-funded channels for carriage of their content, rather than the other way round, which is what now prevails  – is unlikely to gain traction. But it was shrewd propaganda, underlining the point – as it does – that Sky would not be where it is today without a big subsidy from free-to-air sector content.

What’s more, Thompson’s thinking chimes nicely with a change of heart by the regulatory authorities. Ofcom’s recent decision to open Sky’s lucrative but restrictive Hollywood first-run film offer to the Competition Commission is an indication of increasing concern that Sky is getting too big for its boots. It comes hot on the heels of an earlier probe into Sky’s sport offer.

A back-handed compliment, in a way. Sky has become the one to beat. A situation which, if nothing else, will give the BBC a breather for a while.

Lévy makes waves in Brazil, but who’s making the profit?

August 26, 2010

“We believe this will be the decade of Latin America, driven by the Olympics and the World Cup.” Who’s this speaking? In fact, WPP chief Sir Martin Sorrell, referring specifically to one of his favourite BRIC markets; but it might just as well have been his indefatigable rival, Publicis Groupe ceo Maurice Lévy, who has been hoovering up Brazilian advertising agencies as if there’s no tomorrow.

He recently bought a smallish, but trendy, digital agency AG2 , which has been stitched onto Publicis Modem. His latest headline-grabber is a bid for Talent, a privately-owned creative agency that counts Sony, Timberland and Santander among its clients.

According to the Financial Times, which broke the story today, a successfully concluded deal will give Talent a sky-high valuation of $200m (it employs about 200 people), making selling out to the big networks a highly attractive option for other independent São Paulo agencies.

One of Lévy’s gifts as a dealmaker is his ability to seduce his acquisitions into the group as “partners”, leaving them a strong independent identity less liable to defection once the earnouts are paid. The stake in BBH, still 49%, is the most notorious example. With AG2, he has been careful to remodel the network name as AG2 Publicis Modem, in Brazil. At least for now.

The thinking behind the Talent deal is no different. I’m told it’s actually a disguised takeover, to spare the acquired agency’s blushes. Publicis will take 49% when the deal is initially concluded, 11% in 6 months and the rump-end 40% in 3 years’ time. Founder Julio Ribeiro plans to stay on, but he’s of Ed Meyer vintage (78 to be precise); and the chief executive is himself 58.

Talent is a decent agency, with post-tax profits of about $15m (swelled by the Santander account) on revenues of about $50m. But the deal – though a good headline-catcher – is not game-changing for Publicis in Brazil. WPP, which itself showed earlier interest in the agency, is the dominant force. Talent is 15th in the market ranked by billings (according to the latest IBOBE figures, which exclude other marketing services revenue). Publicis’ top Brazilian agency, F/Nazca Saatchi & Saatchi, is ranked 10th, Leo Burnett 13th, Publicis Worldwide 22nd, and Salles Chemistry 33 . But WPP’s Y&R is number one, JWT number 2 and Ogilvy number 3, with Grey trailing at 41. Aggregate score? WPP 1, Publicis (even including Talent) 3.

Deloitte research gives ITV more impact

August 24, 2010

ITV and commercial television cheerleader Tess Alps (of Thinkbox) will have been heartened by an indisputably solid piece of YouGov research  – not their own, as it happens – which bolsters the traditional 30-second ad spot and trashes the pretensions of its so-called digital nemesis.

Tess Alps: Manna from heaven

The results, distilled from 4,199 respondents on behalf of Deloitte as a preamble to this week’s Edinburgh TV Festival, could not be more on message if Thinkbox had designed them. TV advertising appealed most to 18- to 34-year-olds and least among over-55s. What’s more, nearly 90% of the 18- to 24-year old cohort was prepared to admit that advertising had some kind of impact upon them.

Best of all, for the TV lobby at least, more than half the respondents said television was more memorable than any other kind of advertising medium, compared with 10% who opted for newspapers as their favourite medium and – here’s the corker – 2% for online video ads, and 1% for online banner ads, and ads on iPhones and iPads.

If I were Guy Phillipson or one of his eager team of analysts at the Internet Advertising Bureau, I’d be demanding a recount. I’d point out that there are going to be a lot fewer 18- to 34-year-olds about in the years to come; and a lot more over-55s (who do use the internet, and hold an increasing part of the nation’s disposable wealth). I’d also ask how TV impacts measure up in terms of actual viewing (as opposed to distracted multi-tasking).

Still, there’s no denying that television – according to a significant majority of the population – remains by a long chalk the best brand-building medium.

Debenhams brushes off the past, Burgess loses his Local Jewels, Loaded is spent and Foster’s will get funnier

August 23, 2010

Four thoughts on a week spent away:

1. Debenhams has irrevocably hitched itself to the voguish positioning of “natural beauty” pioneered by Unilever’s Dove – with its decision to bannish “air-brushed” fashion models. The department store has been making a number of gestures in this area recently – for example, using a size 16 and a disabled model. But this latest initiative looks definitive.

Debenham’s rallying to the cause raises some embarrassing issues for other elements of the fashion industry which, shall we say, have been less forthcoming on the permissible limits of artifice in projecting an advertising image both unrealistic and unattainable. L’Oréal, for instance, seems entirely comfortable with lightening the skin pigment of rock star Beyoncé Knowles. And let’s not forget the vexed case of Cheryl Cole’s preternaturally bouncy hair extensions, which featured in an Elvive campaign. The Advertising Standards Authority gave Cheryl a clean bill of health. But I cannot help thinking this was a wrong call, out of step with the times. What Dove and Debenhams are doing is the thin edge of a wedge fast being driven into a post-production fixated fashion industry.

2. Now Unilever’s “Local Jewels” really have lost their setting. The departure of Matt Burgess, UK managing director of Marmite, Peperami, Pot Noodle, Bovril and Slim-Fast, seemingly brings to a painful conclusion Unilever’s interesting Chrysalis project, which was formally dissolved last month. Like its architect James Hill, Burgess has moved elsewhere in the organisation. Details remain sketchy, but he would – lucky man – appear to be assuming responsibility for integrating the Radox, Brylcreem and Sanex brands offloaded by Sara Lee into Unilever’s skincare division. Not without a last hurrah, however. The crowd-sourced Peperami ad, described in greater detail by Louise Jack on Pitch, may not be to everyone’s taste. But it’s a wake-up call to agencies.

3. IPC’s willingness to dispose of Loaded, a nineties best-seller, is a reminder of how much the lad’s mag phenomenon has been butchered by the internet. According to the most recent Audit Bureau of Circulations figures, Loaded lost over 26% of its circulation in the last year. That may be a disaster, but it’s by no means a unique one. FHM, now owned by Bauer Media, lost about 18%; while the weeklies Zoo (Bauer again) and Nuts (IPC again) plunged 22% and 17% respectively. From Phwoar! to Uh-ah! in less than 20 years.

4. While on matters laddish, was I alone in being underwhelmed by Adam & Eve’s first stab at refashioning the Foster’s campaign? To the untutored eye, it looked very much like a seamless continuation of the hackneyed stuff that has been pouring out of M&C Saatchi these past few years. Where was the simple Big Idea the client claimed had won A&E the account?

Now we know. Simple, but brilliant. One-off remakes of some of our best-known laddish comedies – Alan Partridge and the The Fast Show have been mentioned – using where possible the original writers, producers and stars; all inexpensively posted on the internet. And all intended to build on Foster’s title sponsorship of the Edinburgh Comedy Awards and Channel 4 comedy. Let’s see how the idea catches on.

Too much marketing at the expense of quality control?

August 10, 2010

As the old adage has it, you can have Speed, Quality and Price, but only two of them at any one time. Some leading brand-owners seem to have forgotten that eternal verity and attempted to have the best of all worlds at once – with disastrous results, according to a thought-provoking article by Jack Neff that appeared in Advertising Age this week.

The gist of Neff’s thesis is that a number high-profile brand catastrophes over the past year – such as those afflicting BP, Toyota and Johnson & Johnson – are essentially attributable to management’s decision to spend too much on marketing and too little on quality control. He contends that the savings on so-called “operational efficiencies” and slashed R&D budgets are ultimately suicidal, because disasters of the above magnitude can undo – overnight – years of patient brand-building, perhaps irrevocably.

Not everyone (by any means) agrees that the fundamental cause of these disasters was the diversion of necessary funds from product enhancement to the marketing budget. For example, J&J’s baffling series of product recalls, and the corporation’s manifest incompetence in righting them swiftly, arguably has more to do with the acquisition of pharma giant Pfizer in 2006 and the botched restructuring that followed than the rechannelling of excessive funds into marketing.

Nevertheless, the article poignantly highlights the limits of marketing when unaccompanied by due managerial diligence.

BP spent five years, and colossal sums of money, building itself into “Beyond Petroleum” – the greener alternative among oil companies – only to cause one of the world’s worst man-made disasters. How much managerial incompetence was at the root of the disaster remains to be assessed, but the suspicion is plenty.

Toyota, which built its brand reputation upon reliability and quality, has now had to recall over 9 million vehicles. It has lost ground, perhaps permanently, in consumer brand quality rankings and done great damage to its corporate integrity by engaging in a series of unappetising cover-ups designed to hoodwink its customers out of legitimate redress.

J&J was once a byword in textbook crisis management, after it brilliant handling of the 1982 Tylenol cyanide scare. Today, it faces federal hearings over its mismanagement of much lesser recalls. Its shiftiness in addressing an avalanche of quality problems has been a gift to the own-label OTC drugs, personal and household sectors.

These are merely some of the most prominent examples. Procter & Gamble itself has been experiencing a significantly heightened number of product recalls (albeit not of the same order) at a time when its main response to intensified competition has been to increase the global marketing budget by a massive $1bn to $8.6bn. Wall Street was not amused by the announcement.

Finding marketing meaning in Big Society rhetoric

August 5, 2010

What exactly does David Cameron’s vision of the Big Society amount to? The cynical, but evidence-based, conclusion is: spontaneous acts of unrewarded generosity by almost every segment of society except the state itself.

While ‘mad axeman’ George Osborne frenziedly appeases the rapacious dictates of international capital markets, the rest of us  – it appears – must supply the deficit with sundry forms of “volunteer” work. At the local community level, Cameron seems to be proposing a boy-scout initiative with a bit of unpaid crowdsourcing thrown in. Similarly, business is expected to dig deep into its pockets to subsidise national policy initiatives – such as Change4Life – left destitute by the annihilation of the public funding formerly underpinning them.

Nowhere, right now, is the fallout more visible than in the marketing communications community, which is tasting the bleak disparity between political rhetoric and reality encapsulated in permanently truncated public sector budgets and a crippled COI.

What can be done to reverse this dreary cycle of perpetual cuts and reignite some top line growth? The glimmerings of an answer has been provided by Cameron’s friend Sir John Rose, who happens to be the chief executive of aerospace engineering company Rolls-Royce. Rose is trying to persuade Cameron to engage in a long-term industrial innovation strategy. That may seem a far cry from the immediate needs of the cash-starved marcoms community but, believe me, there is a marketing angle in all of this for those with the skill to exploit it.

Rolls-Royce has recently produced an audit, based around an analysis by the Oxford Economics consultancy, which seems to demonstrate that its activities contribute a quite extraordinary amount of added value to the UK economy. The figure quoted is 0.56% of UK GDP: £7.8bn of £1,400bn. All the more extraordinary, as the FT points out, when we remember that Rolls-Royce employees account for only 1 in 3,000 of the UK population.

Even allowing for exaggeration, there is clearly an important multiplier effect here. The calculus is apparently based on such things as former workers leaving to start their own ventures (one cited example used the skills he had acquired to set up a coffee-machine factory); through to suppliers who assimilate new engineering techniques by working with the company.

The detail is less significant than the power of the idea behind it. Rolls-Royce is embarking on a new form of corporate social responsibility – dubbed in some quarters corporate social activism. Part educational and part public policy oriented, it is designed to help transition Britain from being a vulnerable service economy to a high-value engineering one.

Rolls-Royce is not unique in this endeavour. Only last month BAE Systems, our biggest aerospace and defence contractor, announced a £50m investment in its Skills 2020 programme, which aims to supply the UK with a continuous stream of high-level engineering talent. Crucially, BAE has managed to persuade the government to actively support its initiative.

Corporate social activism need not be restricted to prominent aerospace corporations. Look to the United States and you will see that Geoff Imelt, chief executive of GE, recently launched the Ecomagination Challenge. It offers $200m of venture capital money to anyone enterprising enough to find a winning solution to revolutionising the US power grid.

Nor is the consumer goods sector excluded from such activism. Pepsi has recently announced a ‘Refresh Everything’ project, which is funding social enterprise at the local level with hundreds of millions of advertising dollars diverted from supporting the Super Bowl earlier this year.

Here, then, are a few ideas that appear to chime readily with Cameron’s Big Society rhetoric. It’s up to marketers to provide the small print, according to Alan Bell, chairman of Bell Design & Communications – whose company recently pitched for the Rolls-Royce account:

“There needs to be a debate about what the Big Society actually means in terms of industry participation. One of the problems with this country is its ‘quick, quick, quick’ City mentality. We don’t look enough to the long term. And now, as this recession is demonstrating, we’ve  been caught out – with devastating consequences for our service-driven economy. In a funny sort of way, the age of austerity may prove a catalyst for new thinking. If we don’t – for example – train our engineers of the future they, too, will be lost to China and India. That new thinking also applies to marketing. It takes time to understand the longer view; branding is not all about identity makeovers.”

Bell speaks from an unusual standpoint. His was the only agency to be selected by UKTI – the government-sponsored body that promotes British businesses internationally – to represent Britain at the Shanghai Expo this year. Bell Design, which now has an office in China, has been conducting a series of branding workshops that brought its team into contact with some of the country’s most powerful regional bosses.

One thing the Chinese certainly understand, Bell says, is the longer view. He is fond of quoting the late Chinese leader Zhou Enlai. When asked what he thought about the impact of the 1789 French Revolution, Zhou – the architect of China’s industrial take-off – replied: “It’s too early to tell.”

The message is: take a leaf out of China’s book, or get left behind.

Swingeing COI job cuts mean the end of the road for state-bankrolled “nudge”

August 4, 2010

It’s difficult not to sympathise with Mark Lund, chief executive of COI, as he contemplates the grim future facing his department.

When I interviewed him for Marketing Week last year, it was clear he accepted that substantial cuts were on the way. But even he, hands newly on the helm of one of the UK’s largest advertisers, can have little dreamt that, rather than circumnavigating a few reefs, he and his crew were going to be driven onto the rocks by a team of professional wreckers (aka Francis Maude and the Cabinet Office).

“Decimation” does not do justice to the future of the COI. Its fate is four times worse than that, with 40% of its staff expected to lose their jobs. That’s 287 people out of 737. Everyone is going into consultation, and that includes Lund himself.

He may not lose his job, but he might well wish he had done. For what is the COI’s role likely to be, post “restructuring”? It will, of course, continue to be a significant media buyer and specialist marketing services consultancy by appointment to Her Majesty’s departments of state. But gone, to all intents and purposes, is the higher strategic mission of reforming society through a lavishly-funded behavioural economics programme (or “nudge,” to put it in the vernacular). The budgets have simply vanished. And so, soon, will the people capable of managing them.

Might they ever come back? If they do, Maude’s axe-wielding makes it clear it won’t be any time soon. This is the really bad news for COI roster agencies, who may have interpreted the draconian restrictions imposed earlier this year as merely a temporary measure, to be relaxed once the economy ticks up. Maude, minister of the Cabinet Office, has made it abundantly clear that this Government is not an adherent of taxpayer-sponsored “nudge”. The days of “wasteful and unnecessary spend on marketing and advertising” and “spending millions of pounds on expensive projects are over,” he tells us.

Over, that is, until the next general election campaign in about four years’ time, when the Government will suddenly find the urge to trumpet all its achievements. But COI culture will have been so traumatised, and its skills so bled, that I doubt it will be up to the challenge by then. The surge, when it comes, is more likely to emanate from the marcoms teams within the departments of state that contract themselves to the COI. Richly ironic if so, because these self-same teams have – for the past ten years – fought an intermittent and losing battle with the COI over mastery of the budgets.

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