Omnicom-Publicis Merger To Create Media Buying Behemoth

Combo Would Control 40% of National TV Spending in U.S.
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Advertising and media buying giants Omnicom and Publicis Groupe plan to announce plans to merge Sunday, according to multiple reports.

The deal would create a company that would control what some executives estimate is as much as 40% of every dollar spent on national TV in the U.S.. It remains to be seen how well coordinated the buying activities of the agencies under the new holding company will be.

In the media agency business, Publicis’ key brands are Mediavest, Starcom and Zenith. Omnicom’s media agencies are OMD and PHD.

Currently, GroupM is the biggest media buying company, with about a 25% share of national TV spending.

“The news is a significant negative for many owners of media properties around the world given potential for their negotiating positions to weaken in the future if the combined entity adopts bulk buying of media as presently practiced by WPP’s Group M,” said former analyst Brian Wieser of Pivotal Research. “While the impact would not play out for many years, long-term media cost inflation would likely be at least partially contained.”

Wieser says other advertising and media agency groups are likely to be involved in deals to further consolidate the business, including IPG being acquired by WPP. “What would have been unthinkable previously would now make sense,” Weiser said.

The consolidation in the agency business comes as the cable industry is considering mergers to increase their scale and coordination, headed by John Malone, who acquired control of Charter Communications and has been eyeing a takeover of Time Warner Cable.

At the same time, some analysts expect media companies to consolidate as well. In a recent report, analyst Laura Martin of Needham & Co. said that with competition from premium online video streaming companies like Netflix putting pressure on profit margins, television companies including Scripps Networks Interactive, Discovery Communications, CBS and Viacom could be sold. She said the most likely buyers are Disney, Time Warner and 21st Century Fox.

Publicis scheduled a news conference for 2 p.m. on Sunday for a "major corporate announcement.” According to The Wall Street Journal, the combined company is expected to be called Publicis Omnicom Groupe. The heads of the two companies are expected to be co-CEOs of the amalgamation.

The new company would have revenues of $23 billion.