Adbrands Weekly Update 1st March 2007

Weekly Update 1st March 2007

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Our favourite ads this week:

French mobile phone company SFR has unveiled its first campaign from new agency LeG. It's a lovely little animated spectacle, very much in the style of Monty Python's Terry Gilliam, exhorting us to "live mobile". Great backing track as well, in the form of Electric Light Orchestra's Mr Blue Sky.

US creative agency Butler Shine & Stern debuted a new viral promotion for BMW's Mini Cooper marque. Spoof cop show Hammer & Coop is a cross between Starsky & Hutch and Knight Rider, in which rogue private dick Hammer fights crime and gets with the laydees with the assistance of loyal sidekick Coop, a talking car. We're hardly breaking new creative ground here, but the spoof webisodes are foolishly enjoyable, containing every cliché out of the book from bearded heavies and masked ninjas to slow-motion bikini-clad carwash girls. Don't forget to generate your own personal Action Name elsewhere on the website (if they ask, tell 'em Sidewinder Tubs sent you...)

The two most talked-about ads of last weekend's Oscar broadcast were probably the new spot for MasterCard and a teaser ad for Apple's iPhone. The MasterCard ad - from McCann - scored strongly on cute points, telling the tale of an elephant who uses a PayPass swipe-free MasterCard to buy cold remedies for its keeper. Top marks for hipness (of course) to Apple. This movie montage of phones past and present is designed to keep the buzz going for the iPhone until its launch, still four months away.

In the news this fortnight: Advertisers & Media

There were fresh troubles at EMI, which released its second profit warning in two months on the back of what it said was an “unprecedented level of market decline" in North America, where CD sales have fallen 20% since the beginning of the year. Soon afterwards, EMI received a new approach from Warner Music designed to reignite talks for a merger of the two companies. It is the 4th such set of talks in seven years. This time, however, Warner CEO Edgar Bronfman appears to have secured agreement from independent music companies in Europe that they will not lobby against a combined Warner EMI.

Merger fever was everywhere over the last fortnight. US satellite radio services XM and Sirius announced an $11.4bn merger in an attempt to head off the intense competition from cable broadcasters. The combined business will be headed by Sirius chief executive Mel Karmazin, a former head of CBS, and will unite the two stations' talent roster, which includes shock jock Howard Stern and TV star Oprah Winfrey. However the deal faces several major hurdles, not least intense regulatory scrutiny. Currently Sirius and XM are the only companies licensed to broadcast satellite radio, so the merger would constitute an effective monopoly. Meanwhile, both continue to rack up heavy losses, which total around $4.5bn since 2004.

Shares in brewing giants Anheuser-Busch and InBev surged on the back of rumours that the two companies had begun preliminary merger talks. There is no doubt that the pair would make a comfortable fit. InBev is weak in the US, while Anheuser lacks a strong profile in almost every world market except the UK and China. A combination of the two would create a vast business, twice the size of #2 brewer SABMiller, and would almost certainly lead to further consolidation within the market.

In another potential meeting of giants, General Motors began exploratory talks with DaimlerChrysler over the acquisition of the struggling Chrysler business in North America. The deal could involve Daimler taking a minority stake in GM rather than cash as payment. However, any deal would encounter fierce opposition from labor unions, resulting in substantial additional job losses on top of the thousands of jobs already lost through cutbacks. Private equity groups are also said to be involved in talks with Chrysler, but Renault-Nissan is said to have ruled itself out of any deal.

Following the breakdown of talks with Google's YouTube over licensing of video content, Viacom became the first major broadcaster to sign up with Joost, a new commercial video distribution project launched by Niklas Zennstrom and Janus Friis, former founders of both music-sharing site Kazaaa and VoIP service Skype. Joost already has agreements with Warner Music and production company Endemol, which controls the Big Brother TV franchise, and will now take on Viacom's MTV, Comedy Central and other divisions. In the UK, the row between Sky and cable company Virgin Media also collapsed, causing Sky to pull its free channels off the Virgin service.

The novelty value of Nintendo's Wii console and its gyroscopic controller has proved a massive, and to some extent unexpected, success. According to latest research, sales of the Wii have far exceeded those of the Xbox 360 and even the new Playstation 3. In January, for example, NPD Group estimated sales of 436,000 Wii consoles in the US, compared to 294,000 for the Xbox 360 and a very disappointing 244,000 PS3s. In Japan, local research group Enterbrain estimated sales of some 410,000 consoles for the Wii, compared to 150,000 PS3s and just 42,000 Xbox 360s. Sony is now promising to flood the market with PS3 players in an attempt to pick up lost ground.

Starbucks founder and chairman Howard Schultz has written a blunt memo to senior executives at the chain, warning of over-commoditisation of the business. The internal memo, leaked to the press, warns that the expansion of the business from less than 1,000 to more than 13,000 stores in a decade has resulted in a dangerous "watering down of the Starbucks experience". Among the factors which he says have "damaged" the brand are the move to automatic espresso machines which "blocked the visual sight line the customer previously had to watch the drink being made, and for the intimate experience with the barista"; and flavor-locked packaging which removed "aroma - perhaps the most powerful non-verbal signal we had in our stores" as well as the sight of "our people scooping fresh coffee from the bins and grinding it fresh in front of the customer". The end result, says Schultz is that outlets no longer have "the warm feeling of a neighborhood store", making it easier for rival operators to poach Starbucks customers. It will be interesting to see what changes the company makes to correct this state of affairs.

Restaurant group Yum Brands faced a public relations crisis after numerous videos of a rat infestation at a franchised KFC/Taco Bell outlet in New York were posted online at YouTube. Some videos show as many as 12 adult rats playing inside the store at night and climbing on work surfaces. The story was picked up by CBS morning news, which sent a film crew to relay live footage shot through the windows of the store. The extraordinary original film is available here at YouTube, along with links to the CBS News story.

In the news this fortnight: Agencies

The UK agency rankings produced annually by Nielsen Media Research for Campaign showed a dramatic shake-up for 2006, with several leading shops suffering sharp declines in billings. According to Nielsen estimates, Publicis, DDB, Saatchi & Saatchi, Grey, TBWA, VCCP and Miles Calcraft were all down by more than 10%; O&M and Euro RSCG both fell by more than 20%; and Lowe London by more than 40%. As a counterpoint to Lowe's woes, caused primarily by the loss of the Tesco account, the highest new entry in the Top 30 was for Red Brick Road, making its debut at #22. Other big jumpers were Mother (up 12%) and Public (up 14%). Beechwood and Beattie McGuinness Bungay also made their debuts in the Top 30 with increases of 26% and 418% respectively.

As a further reflection of the problems being encountered by some of London's leading shops, Campaign today reported that WPP is considering a merger of the local outpost of Grey with United London (the former HHCL), the struggling creative boutique which has signally failed to live up to the hype which greeted its launch just over a year ago. Creative partner Robert Campbell is expected to leave the shop if the merger goes ahead. Publicis London chief executive Grant Duncan is also leaving his post following a string of client defections, most recently the key Asda account, which transferred to Fallon at the beginning of this year.

All financial results are now in for 2006 for the four big global marketing groups. WPP reported robust financial results for last year. Revenues rose 10% to Ł5.9bn ($10.6bn), while gross billings were up 13% to Ł30.1bn ($54.2bn), including net new billings of almost Ł3.6bn ($6.4bn). Pretax profits were up by 15% to Ł682m ($1.2bn). The group said that growth in the industry picked up in the second half of the year after a slow start, but there remained three speeds to the global market - fast in Asia, Latin America and C&E Europe, "surprisingly steady" in North America, and slow in Western Europe. Publicis was also strong, with group revenues up 6% to E4.4bn ($5.7bn), and net income climbing 15% to E443m ($575m). Interpublic showed only slow progress, with net loss reducing to $31.7m (from a loss of $263m in 2005). Revenues continued to slide, drifting by a further 1% to $6.2bn. Continued growth at Publicis's existing businesses, bolstered by the acquisition of Digitas, could push the French group into third place worldwide ahead of Interpublic by the end of 2007. (Omnicom's results, released two weeks ago, showed revenues of $11.4bn. Net income rose 9% to $864m).

Joe Uva, worldwide CEO of Omnicom's OMD media network, is to leave the agency to become CEO of Hispanic broadcaster Univision. No replacement has yet been named, and for the time being OMD will be headed by Daryl Simm, Uva's predecessor at OMD, now CEO of parent entity Omnicom Media Group. Meanwhile Saatchi & Saatchi's UK CEO Lee Daley is to join Manchester United football club as commercial director.

The week's significant new account assignments or reviews: in confirmed announcements, CareerBuilder and Hyundai called reviews of their US accounts (from Cramer-Krasselt and Richards respectively); Virgin Mobile USA transferred to McKinney (from Mother New York); Remington's global business is also up for grabs (out of Grey); Deutsch Los Angeles was awarded the launch of Tesco's US Fresh & Easy stores; and Initiative was confirmed for consolidated media duties on the Bayer Healthcare account in the US. On the horizon: GlaxoSmithKline is expected to launch a review of its media assignments in North America and Western Europe later this year. Mercedes is said to be considering a transfer of its main UK advertising account out of creative boutique Shop (the former Campbell Doyle Dye) into AMV BBDO. Subscribers can access the full Adbrands Account Assignments database here.

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Simon Tesler
Publisher, Adbrands