Doug Poretz

TV: The Next to Fall

TV isn't the only "next" to fall. The large publicly owned multinational ad/etc. shops are also going to face catastrophic issues. Fair Disclosure: I am in the communications business and we operate with a different model (we happen to be successful too).

OK. Consider this:

1. There has been a revolution in the communications business, but the big ad shops have not changed their models. They still bill on the basis of time, which is their biggest mistake. Clients do not care how busy (or not) their agency is -- they care about whether their agency is helping them achieve their goals. They care about value. But ad agencies, pr shops, even digital shops bill by the hour. They all keep time sheets. Dumb. Washington Post Steve Pearlstein wrote about the issue a couple years ago -- see this link: tinyurl.com/ylobdq

2. The revolution in communications also means that those who want to take a message to an audience have many distribution channels to use. But the agency business is defined by distribution channel -- that is, they are an ad agency (or the ad practice group) because they buy time or space on media owned by others; pr firms earn coverage on media owned and controlled by others; digital shops use digital distribution channels. But communications isn't about using a particular channel -- it's about getting the right message to the right targets using whatever distribution channel works. The agency business is irrationally organized on the basis of a tool that can be selected to achieve a goal instead of the goal itself.

3. Remuneration is wrong. People are paid based on how much time they and/or their practice group bills. This discourages collegiality in a creative endeavor when collegiality should be encouraged.

4. The multinational agencies are top heavy and economically trapped by their acquisition history. Companies acquired with earn-out agreements often left their own overhead in place. Acquirees became acquirers because it would often boost their own earn-out pay, and that created even more layers of overhead -- expensive and cumbersome and just what you don't want when you need to turn a big ship around quickly. Plus, some of a parent's agencies are going to meet the criteria to get paid on the basis of their acquisition agreements -- usually these payments can be made by either stock or cash, but they must be paid. How are they going to be paid in the future? With precious cash or with stock that has been dramatically devalued and therefore highly dilutive?

5. Some markets are totally dead: both certain geographic markets where the large agencies have offices and certain industry verticals for which the large agencies have dedicated offices. Those locations are going to have to be shut down or be significantly downsized. That is going to cost time, money, and disruption that will ripple through the morale of the entire workforce of all the agencies of the parent. That disruption will lead to clients fleeing to new shops with new models and the prospect of stability -- and the highest quality personnel (always in demand) will also flee to the new shops, and that will only continue the disruption. Loss of time, money, clients, talent -- all on the horizon.

As I said up-front, I am in the business and clearly have a bias. You can click on my name or blog above for more.

Pragmatic Media Predictions for 2009

I agree with much of your predictions. Here are two more:

-- There will be at least one failure among the several multinational communications conglomerates built through earn-out acquisitions of ad agencies, pr firms, interactive and other related niche firms

-- Whereas there will be a collapse in the amount of consumer-oriented "buy this" messengers hitting the American citizen, there will be a very noticeable increase in the amount of politically-driven messages due to the mission critical need special interest groups (corporations, associations, community groups, etc.) will have to defend the status quo that benefits them from being changed and to promulgate new proposals that could aid them. The increase in "supporterism" will be attributable to the ability of President Obama to sell his agenda to the American public for enactment by a majority Democrat Hill. This will gradually lead to a shift in cultural values in the nation.

Big Media: Future Growth Depends on Serious Change

There will be a concurrent meltdown with the large ad/PR/etc agencies. Just wait. There will be "Lehmans" in the communications business.

100 Companies That Can Take Themselves Private

Great observation. Furthermore, as someone who works closely with CEOs, often on issues related to being public companies, I often hear that the attraction of not dealing with being a public company is very compelling. But I think the low cost of going private will be only one attraction. I also think that the economic and political environment will create an environment for numerous fundamental changes in many industries. A lot of game-changing rules are likely to be proposed in healthcare, environment, financial services, the list will not stop at the obvious. Issues of valuation and trying to make credible projections will be extremely difficult and maybe irrelevant if you don't know how the industry might change a year from now. The attractiveness of being private while that is happening will become even more compelling. Interesting prospect ....

Big Media Coming Apart at the Seams

I'd like to provide another perspective on the issue of what is happening in the communications business. I have spent 40 years on the side of working for the enterprise trying to communicate a message (P.R. et al), having the weird good fortune of reporting to the senior person since I was 23. I spent a chunk of about 20 years just focused on investor relations in-house for three major corporations and on a retainer basis for a whole bunch. Now I am co-founder and partner of a successful communications firm. Anyhow ...

I think we are about to see a really major phenomenon. Imagine a pie chart with two slices, one represents messages that basically say "buy this" and the other represents messages that basically say "support this." Although "support this" messages have become more visible over recent years, the communications business, and, in particular the advertising business, has been dominated by those wanting to get consumers to buy something. There is about to be a major change in the way that pie looks for two reasons: 1) a surge in need on the part of special interest groups of all ilks and sizes to get out their messages, and 2) the redirection of "buy this" messages toward interactive.

As to the first reason, consider what is about to happen in this country. Whether Obama wins or McCain wins, the White House is going to be dramatically energized versus the inert Bush Administration. There will be a new cabinet and there be new priorities. At the same time, the Hill will change not only in terms of the Democrat's lead, but a very large voter turnout will fuel a momentum for change. That momentum will begin to be translated into actual proposals, both legislative and administrative. The mood will encourage more than just change around the edges -- what will be at risk will be game-changers. New rules and regulations, new impacts on the P&L, probably new accounting rules, new ways of doing business, importing, taxing, addressing the environment, and that says nothing about, well, name it.

And for each proposed change there will be numerous special interest groups, right or left, public or private, the whole gamut, who are going to want to defend their current position and/or promote a new one. That is very often the case, of course, when there is a change in the White House. This time it is different by an order of magnitude by virtue of degree. The special interests won't only want to communicate their messages .. they will absolutely need to, because the political environment and the escalating speed by which things are done during a crisis will combine to create really bold (and very often dumb) ideas. And those ideas will be so significant that the special interest groups (including many non-U.S.) will not be able to sit on the sidelines and let whatever will happen happen.

So, we're going to see a major fight over who controls the various public (and private) debates. And that means, we're going to see a major surge in "support this" communications campaigns.

At the same time, we're going into a deep economic slump -- call it "recesssion" or "bula-bula" -- it won't matter. Unemployment will be high. The consumer will no longer have the home equity and credit card piggy banks. And those with money in their wallets, well they've accumulated enough over the past bunch of years and they are going to keep their wallets closed. So what will those who need to push the "buy this" message do? They are goling to get as close to the consumer and the consumer's buy decision as possible. Like in front of your eyeballs right now where you can make an impulse decision by clicking a button. Ask me, as a guy who communicates messages, whether I'd prefer to get my message to someone when they are sitting at home and have to remember to go somewhere to buy my product, or whether I'd prefer to get my message to someone who can litterally lift a finger to buy my product rigtht now. Duh. But while I am answering the question, I'll volunteer some more preferences. I prefer to get my message to someone who is more than moderately interested in what I have to say. I prefer to get my message to someone who is experiencing a rainstorm if I am selling umbrellas. I prefer to get my message to someone I know will react positively to this particular image and this particular word.

My goal in this post was to provide another perspective -- the perspective of someone in that industry that very often pays the bills and provides a lot of the content in the media/communications industry. From at least this one person's perspective, the depth and speed (and cultural consequences) of a fundamental change in the communications business will all be greater than most imagine at this point. It won't take long to see it. There will be economic consequences of course, but there will also be very serious consequences to the business models in the entire industry. If you follow the big ad/pr/etc agencies, watch out. I think they are about to see that they have operated under an outdated time-based business model in a value-based world.

I write about ideas like this at my blog, deathoftime.com if you are interested.