Initiative Media’s Disney Loss Caps Difficult Ad Year
By CLAUDIA PESCHIUTTA
Staff Reporter
Not every Disney story has a happy ending.
Walt Disney Co. recently terminated its 15-year relationship with Initiative Media North America, capping a tough year in which the Los Angeles-based media buyer lost other high-profile accounts in the middle of a depressed advertising market.
Industry sources said that the loss of the Disney account, worth close to $500 million, could lead to layoffs or other adjustments at Initiative, whose billings in 2001 remained flat at $7.1 billion. (Counting recently acquired True North Communications Inc., Initiative had billings of $12.7 billion.)
“They haven’t had any major wins for a while and they’ve had some losses,” said Jack Myers, publisher of the Jack Myers Report, a media industry newsletter. “This is a body blow to the company and it wouldn’t surprise me if we saw some management changes as a result.”
But sources suspect that losing the Disney account may not have been all Disney’s doing. They said that the Burbank-based entertainment giant was squeezing Initiative by demanding lower fees for the account to the point that Initiative dropped out of the review at the last minute.
“They weren’t making a lot of money on that account if they were making any,” said one agency executive. “The commission that Disney had beaten them down to had probably made it a break-even proposition.”
An Initiative spokeswoman said executives could not be reached for comment.
In a conference call that followed release of disappointing third-quarter results of Initiative parent Interpublic Group of Cos., Chief Financial Officer Sean Orr responded to concerns about the potential loss of the Disney account by saying it was “something with less than $10 million in revenue,” Adweek reported.
While Initiative did win some important business last year, including Gateway’s $250-million media buying and planning account, it failed to beat out competitors in other reviews. Besides Disney, Arco left for MindShare in L.A., the Stratosphere Casino Hotel & Tower in Las Vegas moved to Carat U.S.A., and video-game maker Electronic Arts took its business over to Palisades Media Group in Santa Monica.
Earlier, Initiative lost millions of dollars in billings from its once numerous dot-com clients. The company, which has 23 offices throughout the United States, has cut its staff from 1,600 to 1,500 through attrition and layoffs.
The Disney account helped Initiative, formerly Western International Media, make a name for itself. But the relationship began to change sometime after Western was sold to Interpublic in the 1990s. While Western founder Dennis Holt carefully tended to Disney’s needs, Initiative’s management did not provide the same level of service.
“A lot of the relationship that made the Disney-Western situation such a strong one has disappeared over the years,” Myers said. Disney officials declined to comment.
Given the economic downturn, clients are spending less and demanding more for their money.
After 15 years with Initiative, Disney began considering new media buyers in the fall and recently selected Starcom Worldwide, a media buying and planning firm owned by Chicago’s Bcom3 Group Inc.
Disney’s move represents a consolidation of its media business because Starcom already handles media planning for two theme parks and the Disney cruise line. It may also help stretch Disney’s media dollars. That would be good news for the media conglomerate, owner of the ABC network and several theme parks, which has been hurt by a long decline in advertising spending and the tourism slump kicked off by the Sept. 11 attacks.
“I don’t know that Starcom is going to be any better than Initiative at negotiating with the media, but their presentation says they’ll be more strategic, more research-oriented, more focused on return on investment,” Myers said. Starcom officials declined to comment.
Losing Disney also will make it harder for Initiative to win accounts in the future.
“When you’re on a losing streak, you go into the next competition with a little less confidence,” Myers said. “Your competitors know you’re on a losing streak and they attack your weaknesses.”
