Are there too many media agencies?

An oversupply of media is a perennial concern, but there have been recent suggestions there are also too many agencies, surviving on unsustainable share deals to prop up their business models. Is consolidation overdue?

NO - Bob Wootton, Director of media and advertising, ISBA
It's a market and the market can decide, and has decided, how many are viable. At the top end, there's not much choice for advertisers seeking to avoid being bundled with their rivals, especially when you consider consolidation into buying groups.

According to The Nielsen Company, WPP's GroupM has three of the top 10 buying points. Omnicom's OPera and Publicis/VivaKi have two each, and Carat and Interpublic one each. The only independent in the 10 is Walker Media. Havas has two just outside the top 10.

Media ownership is also quite consolidated; ITV alone has about 45% of commercial TV revenue.
Yet many of the consumer markets in which advertisers operate are much less concentrated.

This explains why advertisers are so often mystified by competition regulators' decisions to permit levels of consolidation among their media partners they can only dream of in their own markets.

YES - Claire Enders, Founder and chief executive, Enders Analysis
There are too many agencies, given the state of the media markets. In addition to the
long-running problem of oversupply of media, the ­combination of structural and macro­economic trends in advertising indicate that overall revenue for media industries in the UK will fall 18% in 2009 and 10% in 2010.

We expect some sectors, such as TV and radio, to stabilise their declining top lines sometime in 2011, but they will never recover to the peak levels seen in 2005-06. As regards news­paper ad revenues, we believe the decline will continue for the foresee­able future, although the rate of decline will attenuate from 2010.

Even the new media that have created so many opportunities for new agencies are in mild recession. In this environment, we would expect the biggest players to gain share and all but the brilliant and specialised smaller agencies to lose share.

NO - Paul Phillips, Managing director, AAR
Are there too many advertising, digital or PR agencies? Are there too many supermarkets or estate agents? On the face of it, the answer is probably yes to all of the above; no one is crying out for another media agency.

But the point is that each has a client base and their continued success will be dependent, to a large extent, on how well they service them. If they fulfil a need, at a price clients are prepared to pay, can add value and demonstrate a worthwhile contribution to client business, they'll probably be around for a while longer.

There are three things to consider about the media agency landscape. One, clients get the agencies they deserve and vice versa. Two, the successful media agencies of the future will be far less reliant on the media buying services they offer their clients. And three, our business is thankfully a meritocracy that attracts successful entrepreneurs. It is all the better for being so and long may this continue.

YES - Tim Brooks, Managing director, Guardian News & Media
There used to be genuine differentiation based on buying performance, but that has been largely competed away and the buying end - where the money is - is commoditised. Hence the increased emphasis on consumer insight, claimed with more or less credibility by all the players.

Although faced with a large client procurement department, I fear that often plays like Bambi Meets Godzilla.

Media agency costs are people, systems and property - and there are genuine scale economies available in the mix, which also has the effect of raising barriers to entry.

They face the same acute pressure on margins as the rest of the value chain, exacerbated currently by low interest rates that nullify the historic profit contribution of treasury management. Given these forces, it seems inevitable that the big networks will further push consolidation.

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