Changing The Storyboard

In the 1980s, Mumbai-based advertising agency Rediffusion did a smart thing. It had a tie up with Ted Bates of the US which had the Colgate account in certain parts of the world. Thanks to this connection, Rediffusion was handling Colgate in India. It was the big ticket item in the company's portfolio of clients. Then news filtered through that Ted Bates would lose the account and Young & Rubicam a New York-based agency, would get it. In double quick time, Rediffusion dumped Ted Bates and tied up with Young & Rubicam and the Colgate account was saved.

Last week, the tables seemed to have turned on Rediffusion when Young & Rubicam was bought over by the world's largest advertising conglomerate, $15 billion WPP group, again of the US, in a $7.5 billion stock deal.

 

The question being asked by everyone is, will the tie-up between Rediffusion and its foreign associates end? At the moment, the Indian duo of Ajit Balakrishnan and Arun Nanda hold a 60 per cent stake in Rediffusion, while Dentsu of Japan and Young & Rubicam hold a 20 per cent stake each.

At the same time, WPP already controls three of the country's top ten agencies _ Hindustan Thompson Associates (HTA), Ogilvy & Mather (O&M) and Contract Advertising. Also part of the group are smaller agencies Speer and Equus. So, will WPP let Rediffusion thrive on the Young & Rubicam association, or will Young & Rubicam sell out of Rediffusion and come under the WPP umbrella in India?

If Young & Rubicam walks out of the three-way joint venture, the implications are severe for Rediffusion. Three clients _ Colgate, Maruti and Citibank _ account for almost 40 per cent of the agency's business. Two of these clients, Citibank and Colgate, are there thanks to the Young & Rubicam connection. Globally, Citibank has already suggested that it is reveiwing its alignment with Young & Rubicam. For Rediffusion, the Citibank account , in fact, takes care of almost the entire billing of the Chennai office, while Colgate contributes 60 per cent of the Mumbai office's billings. Should Young & Rubicam walk away with these accounts, Rediffusion will lose these accounts and land in a spot of trouble.

Rediffusion managing director Nanda refuses to be drawn into the controversy limiting his comment to: "From what we hear, the deal is in the final stages of completion. As of now, the terms are not known." Still, if Young & Rubicam comes into the WPP fold, the latter's share of the Indian market will increase from 28.2 per cent to 33 per cent, the largest share that it has in any market in the world.

Listen to Sajid Peerbhoy, executive creative director, Ambience D'Arcy: "The takeover would have a tremendous impact in India. It makes WPP a far more dominant player as it woud give it tremendous media buying power."

Industry opinion is split on the impact. HTA managing director Mike Khanna and Contract head Ram Sehgal insist that the picture is hazy. "Things are still unclear simply because we don't know the terms of reference under which the deal has been made. Nor do we know what agreements have been made with the agency's clients," says Sehgal. But he is quick to add: "When you have a foreign partner, whatever happens outside the country is outside your control. There's nothing you can do about it."

Now listen to Rajeev Agarwal, managing director, Enterprise Nexus: "The takeover will not affect clients because WPP is not an agency, it is like a benami owner in that it is only the holding company. And the group's agencies already operate as different entitites, even competing with each other."

On another count, there is a glimmer of hope for Rediffusion to retain at least one of the two clients it stands to lose. If Citibank gives up Young & Rubicam, it provides Rediffusion a window of opportunity _ it could align with the agency which gets the account. But is there a possibility that Citibank will hire an agency from the WPP stables? Hardly. O&M is an American Express agency while all the other WPP group agencies too have big bank accounts.

Similarly with Colgate. Its arch rival Unilever is one of the largest clients of the WPP group. So would the sworn rivals like to be under the same umbrella? Unlikely. In case, Colgate dumps Young & Rubicam and finds a new agency, Rediffusion could align itself with that agency. Besides, Colgate has done business with Rediffusion for many years and it would think twice before changing its agency. Right now, however, all this lies in the realm of speculation.

So where will that leave Rediffusion? Says an industry source, "Rediffusion may have to decide whether it wants to be on its own or if it can find another buyer." Yet, the question already being asked is, would Rediffusion be a worthwhile partner without the Colgate account. What could save the day for the agency is the tremendous reputation enjoyed by Nanda. "Nanda is one of the most intelligent and smartest players around. For all you know, he may have already done a deal for his stake to be bought out," says an industry source who has requested anonymity.

Adds another industry insider: "There may be gloom and doom for some days but it won't be for long. I have immense faith in Nanda who is a great man of action."

On the WPP front, the acquisition will further strengthen the group's stranglehold on the Indian market. It could also see the long-awaited entry of Mindshare, WPP's media buying arm. For the past three years, Mindshare's entry has been put on hold due to alleged differences between WPP's Indian agencies. Now, talks are said to be on one more time.

Peerbhoy also points that at the back-end there will be a sharing of resources. For instance, three years ago, when the group started integrating its agencies in the country, travel bookings were consolidated leading to huge savings. A similar thing could happen now. There could even be consolidation of services like public relations and direct marketing.

In any case, the days of the independent agency seem to be over worldwide.

In India too, all the major groups from Interpublic (its agencies include Ammirati Puris Lintas, SSC&B Lintas and McKann Ericcson) to Omnicom (DDB Needham, which has a stake in Mudra, R K Swamy/BBDO and TBWA Anthem) to the Lowe group have established themselves. Together, the consortia account for over 80 per cent of the Rs 8,000-crore Indian advertising industry. And as further consolidation takes place, the competition will only become more fierce.

Meanwhile, the acquisition of Young & Rubicam will only enhance, WPP's premier position. Yet, it was only in 1985 that Martin Sorrell, the WPP head honcho, chose to make Wire & Plastic Products plc, a UK-based manufacturer of wire baskets, the public entity through which to build a worldwide marketing service company, acquiring first a stake in it and then a year later, acquiring 10 marketing services companies in UK and USA followed of course, by that headline-breaking $566-million deal for the JWT group in 1987.

While Sorrell is undoubtedly uncorking the champagne, Nanda and Balakrishnan have to do some serious thinking.