Mergers Create One-Stop Ad Shopping

Tribune Co.’s planned $6.1-billion acquisition of Times Mirror Corp. is part of an advertising industry trend toward increasingly large media companies that can offer big marketing companies one-stop shopping for their print, broadcast and online advertising needs.

“We’re in a world that’s being divided into really big players, very small players, and the rest--which are increasingly nonplayers,” said Louis M. Schultz, chief executive of Initiative Media, which last year conducted $5.4 billion in media buys for such companies as Walt Disney Co. “It’s true in the media business and the advertising business. The middle ground is getting eaten alive.”

America Online Inc.’s proposed merger with Time Warner Inc. underscores the increasing importance that new media will play in the advertising world. Such companies as CBS Inc. and News Corp. also are trying to leverage their increasingly diverse media properties by offering what advertising industry insiders call cross-platform advertising opportunities.

At CBS, that has included advertising packages in conjunction with a CBS News segment anchored by Dan Rather that bridge the company’s television, radio, billboard and online operations. Fox has offered advertisers the opportunity to celebrate the 10th anniversary of “The Simpsons” by buying cross-platform packages.

“It’s all about profits, about leveraging your TV stations, your newspapers . . . and the more of those resources you own, the better your chances [of surviving],” Schultz said. “You can expect more of these deals in advertising and media because you have to be big enough to play in the . . . world of convergence.”

Merger fever also has infected the advertising world, with large holding companies snapping up smaller agencies as they scramble to establish a worldwide presence. Los Angeles-based Initiative Media is the result of a 1994 deal involving Western International Media, which was acquired by advertising industry giant Interpublic Group of Cos. and merged with Initiative Media Worldwide of Paris.

The deal that would fold Times Mirror, parent of the Los Angeles Times, into Chicago-based Tribune is designed to build upon the cross-platform advertising deals being offered in Chicago, said Michael J. Wolf, an entertainment and media industry analyst in New York with Booz, Allen & Hamilton Inc.

Tribune’s Chicago holdings include the Chicago Tribune newspaper, television station WGN and the Chicago Cubs baseball franchise. Advertisers can structure deals that include broadcast and print elements, as well as promotions involving the National League team. Tribune executives hope to offer similar combinations in New York, where the combined companies’ holdings would include WPIX-TV and Newsday, and Los Angeles, where Tribune would own KTLA-TV Channel 5 and The Times.

“This deal brings together whole sets of marketing solutions--radio, TV, newspapers and Web sites,” Wolf said. “The company would be very attractive to multi-market retailers and national advertisers who need mass-reach vehicles like TV and newspapers, which are increasingly attractive in a splintered world.”

Bill Imada, co-founder of Los Angeles ad agency Imada Wong Communications Group, said the combined companies could be more attractive to advertisers that need to buy both print and television. “From a media planning point of view, it’s easier to deal with one contact than 10,” Imada said. “And there could be incentives, say, doing an ad campaign in print and getting incentives to make the broadcast side more attractive.”

As the number of mergers grows--and the options open to advertisers narrows--it’s possible that a smaller number of media companies could prompt higher advertising prices.

And ultimately, Tribune’s success depends upon top executives substantially changing the way the merged companies work. “On paper, it should be good for advertisers,” Schultz said. “But it’s up to [Tribune] to figure out how to make it work. The newspaper guys don’t necessarily care about the TV package and vice versa. Unless [Tribune] is dedicated to making a change in the corporate culture, it isn’t going to work.”

Advertisers also must determine which packages make demographic sense. Wolf said.

Imada cautioned that simply having print and broadcast options in a given city won’t guarantee success. “There are questions involving psychographics and demographics of newspaper readers vs. television viewers,” Imada said. “And, when you compare the newspapers and the television stations, it could be night and day.”

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* DISPUTE OVER DIRECTION

Behind the deal, a clash of two executives. A1

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Mega-Media RevenueThe 10 leading U.S. media companies had more than $75 billion in media revenue in 1998, the latest year for which figures are compiled. Total media revenue, in billions: Time Warner/AOL*: $19.1

CBS/Viacom*: 10.7

AT&T;: 9.9

Walt Disney: 7.5

NBC TV: 5.3

Tribune/Times Mirror*: 5.1

News Corp.: 4.9

Gannett: 4.9

Cox Enterprises: 3.9

Advance Publications: 3.9

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*Proposed mergers

Source: Advertising Age

Note: Media revenue includes advertising revenue and subscription fees from print, broadcast, cable and online operations. Researched by NONA YATES/Los Angeles Times