That 800-Pound Gorilla Is Named MagnaBuying firm led by Bill Cella controls $10B in ad spending 5/11/2003 08:00:00 PM Eastern
Call him the market-maker. That's the role Bill Cella and the company he runs, Magna Global, want to play in the upfront ad-sales market this spring, when advertisers plunk down their money on next season's new programming lineups.
Cella's strategy: go first and pay less. The reason that ought to work, he says, is the huge amount of money—upwards of $10 billion—that he and his Magna team represent at the bargaining table when they negotiate TV ad rates and spending.
Magna estimates that its advertiser clients account for up to 25% of all broadcast-network prime time advertising. Technically, Magna's "clients" are the two huge co-owned media-planning and -buying arms of the Interpublic Group of Companies, Initiative Media and Universal McCann.
Initiative and McCann are the entities that work with the advertiser clients, which include some of the nation's leading marketers. Among them: Home Depot, Coors, and Bell South (at Initiative) and Coca-Cola, Sony, Johnson & Johnson (at McCann). Interpublic formed Magna Global almost two years ago with the goal of getting the best prices possible by putting the whole stack of TV advertising dough under one negotiating arm.
Looking for an a-plus
Cella says it's working. Last year's upfront was the first year that Magna Global represented all of Interpublic's broadcast-network money in the upfront. And the rates were better than they otherwise would have been, he says.
"I'd give ourselves a B for last year in our first outing. You strive for the A-plus, and, hopefully, we'll do better this year." Magna's big share of upfront ad dollars "certainly resonates with the networks," he says. "It can make their market."
Typically, the networks strive to raise prices throughout the upfront process, as less and less inventory remains available.
With 20%-25% of a network's inventory sold at the start—to Magna clients—then the networks "can legitimately say to the other buyers, 'We have a big base down, and now you guys have to pay a little bit higher price because [Magna] was the first one in.'"
No double-digit increases
One thing Cella is fairly certain of is that this year's upfront market is not going to yield the kind of double-digit rate increases that some on the network side are talking about. Just two weeks ago, Viacom President Mel Karmazin told analysts during a teleconference that he believes network upfront prices—at least for CBS—will be in the 15%-20% range. Executives at other networks are not quite as bullish but still say that 10% or a little higher may be attainable.
One high-level executive at another network said last week he expects the major networks to get 7%-10% rate hikes for the 18-49 demo.
The way Cella sees it: 7% maybe, 10% not likely.
"I don't think the market is going to warrant double-digit numbers," he says. Instead, he sees price hikes in the mid- to high-single digits.
And if the networks try to impose "ridiculously high rates, then we will take a hard look at putting more money toward cable." Each year, he says, advertisers get increasingly comfortable with the idea of allocating more of their budgets to cable. "That should be a real concern to the networks" and have a moderating effect on rate hikes.
Cella argues that there is still a "general malaise" in the national economy that is affecting many advertisers. "Not all companies are doing that well," and that could negatively impact the amount of total ad spending in the coming upfront.
Broadcast-network sales executives, eager to have Cella as a customer, were not eager last week to comment on Magna or on his remarks.
But Joe Abruzzese, who negotiated with Cella last year as head of ad sales at CBS, and will do so this year as head of ad sales for the Discovery Networks, says the biggest advantage Magna has is "the large and diverse group of accounts they have." That in turn, provides Magna with a lot of information about the marketplace, which, "helps them make better decisions," he says.
Abruzzese also credits Cella with being open to new ideas, and as a result, "he hears a lot of them first." As for the go-first-pay-less strategy, Abruzzese says, "nine times out of 10 it will work."
Meanwhile, Magna is also gearing up on the programming front, having formed Magna Global Entertainment (MGE), overseen by former McCann-Erickson executive Robert Riesenberg.
By creating sponsored programming, Cella says Magna hopes to give clients more bang for their media buck and also to control the programming environment to address such issues as clutter and personal video recorders.
One of the more high-profile programs MGE is involved with is the new reality show The Restaurant, about the thrills and pressures of toiling in a trendy new eatery in the Big Apple. The show, a venture of Reveille, Universal Television and MGE, will air on NBC this summer.
The Restaurant will feature product-placement deals with at least three Magna Global advertisers: Coors beer, American Express and Mitsubishi. Magna has also done deals with Turner Broadcasting for several shows, including the Lowe's-sponsored House Rules home-improvement show and a series of made-for-TV movies under the "Johnson & Johnson Spotlight Presentation" banner.