Martin Sorrell's View of the Key Developments Facing Advertisers and Media Firms

Martin Sorrell, who grew up and lives in the UK, is head of WPP, the largest marketing-communication conglomerate. As such it decides which media firms to support around the world. List list is from "Jack Myers’ Think Tank," a newsletter. Meyers evidently got it from a speech Sorrell recently gave.

1. Global Shifts in economic, political, social and cultural power.
2. Continuing Auto Production Capacity and the under-capacity of people/customers. While U.S. auto capacity has declined, the capacity in China and India has expanded. Over capacity of supply and under capacity in the supply of people makes the role of agencies and marketing even more important.
3. The Web. The reason the Consumer Electronics Show is important is that the tech companies are now media owners. The Web disintermediates legacy players and is a more attractive destination for talent.
4. Internal Communications. Communicating strategic and structural change is an internal challenge for organizations as much as -- or more than -- an external challenge.
5. Retail Power. Major retailers are gaining power, especially when there is little inflation. Retail companies put pressure on manufacturers, pushing companies like P&G into direct consumer marketing through websites.
6. Global Centralization. As companies expand and gain global influence, they are integrating their organizations at the center.
7. Procurement and rise of the finance function puts more emphasis on cost management.
8. Governments, as both regulators and as clients.
9. Corporate social responsibility. Doing good is good business.
10. Content. We have to think about content in the context of how business is fundamentally changing. Consumers have to pay for content. There is not enough advertising to finance the business models of all the new media. There needs to be more consolidation for the health and development of the media business. State subsidies have to play a greater role to maintain professional journalism.

- From Jack Meyers, "Sir Martin Sorrell's Ten Priorities for Media, Agencies and Advertisers," From Jack Meyers Think Tank, February 1, 2010.

Profiting from Internet Radio is Tough

It's a real shame because Yahoo was such a pioneer in this field. It should serve as a cautionary tale of what can happen when copyright holders want too much money.

- Tim Westergren, founder and chief strategy officer of the Pandora web music service

In Michael Liedtke, "Rising royalties send Yahoo's Launchcast to CBS," Associated Press via The Industry Standard, December 4, 2008

Yahoo Launchcast is the second major music website this year to turn to CBS for streaming its internet radio services and the ads connected to them. AOL Radio, owned by Time Warner Inc., hooked up with CBS in June, 2008. Both Yahoo and AOL were responding to a March 2007 decision by the U.S. Copyright Royalty Board that raised the royalties for music streamed over online radio. "That aided the music industry, which is desperate to offset steadily declining revenue from compact disc sales, but it meant by some estimates that royalties could eat 70 percent of Internet radio stations' revenue." Yahoo's executives have also been trying to cut costs substantially in the face of revenue shortfalls.

CBS Radio can afford to carry this type of streaming despite the higher royalty rates for two reasons. One is that some of its internet radio channels steam news and sports-talk formats that attract advertising put do not have to pay music royalities. Launchcast's music-only approach, playing News and sports-talk stations don't have to pay the higher rates because they don't play music. The second reason is that CBS executives believe that they can target ads to listeners better than Launchcast could--based on ZIP codes--and that this ability will help them garner more advertising money while playing music.

Many internet streaming companies, including much-acclaimed Pandora, are under strong financial pressure. Clearly, as Tim Westergren suggests, the Royalty Board's ruling has made a web filled with a huge number of independent music streamers a thing of the past.

Private and Public Developments in TV Product Placement

If you can't measure it, you can't sell it.

-Alan Wurtzel, president of research and media development at NBC Universal

In Alana Semuels, "Research Firm Nielsen Tallying Product Placement Ads," Los Angeles Times, July 21, 2008

The measurement of product placement in television programming has become a major activity during the past few years. Marketers increasingly make deals to have their goods show up during the action so viewers will have no choice but to see them. (When it comes to commercials, they can always switch channels or fast-forward on their DVRs.) The Nielsen research firm has ambitions to become the major go-to company in this area (as it is with television ratings) and it has augmented its own audits of products in programs with the purchase of IAG Research, which uses a different method to track placements. Other companies audit placements in different ways, all trying to prove their value to marketers and their agencies, who need to justify their activities. "Advertisers spent $2.9 billion in 2007 to place their products in TV shows and movies, up 33.7% from the year before, according to media research firm PQ Media. This year spending is projected to hit $3.6 billion, not including "barter" arrangements -- in which a company gives away products to be used in shows, rather than paying for them to be placed there."

In the midst of all this private research activity, the Federal Communications Commission has responded to critics who argue that consumers need straightforward information about when products are being placed in programs in exchange for money. "Such disclosures currently run during the credits, but the agency plans to examine whether product placement notices should be written in bigger print and displayed for a longer period."