Mondo combos bombo ad biz
The planned confederation of the Federated and May department stores is not good for newspapers, which sell the lion's share of the combined $1.15 billion the merchants spend annually on advertising.
The pending merger is but one of several mondo combos that are putting nearly $7.4 billion in ad revenues in play, as illustrated in the table below. This represents about 3% of the total U.S. ad spend of $245.5 billion in 2003, the latest year for which figures are available. Sales figures were provided in the newly released Fact Packfrom Ad Age.
When the the Federated deal closes, expertsbelieve , several stores will be shut in the interests of efficiency, including -- although I find this hard to believe -- maybe even The Saks on Fifth Avenue! Fewer stores presumably would mean fewer dollars spent on attracting customers. Still, it's safe to assume a significant portion of $1.15 billion will be continue to flow after "May" day.
The outlook is less encouraging for the pending Kmart-Sears matchup. Kmart's ad budget, most recently reported at a bankruptcy-impaired $273 million, is a fraction of the $1.63 billion shelled out in all categories by Sears. Most observers believe Kmart pursued the deal because it sees big upside in selling the leases to several Sears sites. Fewer stores equals fewer ad buys.
Taken together, the ad budgets of the four retailers total $3 billion-ish. About two-thirds of those budgets go into the coffers of newspaper companies, representing maybe 4.5% of the industry's total sales of $45 billion.
Even as newspapers ponder the future of their relationships with the retailers, they already have lost their second largest advertiser, AT&T Wireless. Until it was acquired by Cingular earlier this year, the Ma Bell cellular spinoff had been spending $510 million annually on newspaper advertising alone (not counting TV and other media). Pre-merger, Cingular shelled out $645 million in advertising. Color much of that billion "gone."
The Cingular-AT&T deal is but the first of the telecommunications mergers likely to zap an enormous amount of ad-buying power.
SBC, which spends $1.5 billion a year on advertising, is buying the remains of AT&T, which itself is spending more than a billion a year. In all likelihood, the sum of the post-merger ad budgets will be considerably less than the $2.5 big ones flowing into the market today.
The story is the same but the numbers are smaller in the pending Sprint acquisition of Nextel. Sprint spends $477 million on advertising vs. an estimated $150 million by Nextel. Post-combo, look for the total to be lower.
Merger fever is fueled by the desire of top executives to get big, grab market share and cut costs, sort of like, say, Wal-Mart.
Oddly enough, the boys in Bentonville don't hold much with advertising. At the same time Federated-May spent 3.83% of their combined $30 billion in sales on advertising, Wal-Mart's ad budget reportedly was $428.6 million, or a meager 0.16% of its $262 billion in sales.
Ouch.
The pending merger is but one of several mondo combos that are putting nearly $7.4 billion in ad revenues in play, as illustrated in the table below. This represents about 3% of the total U.S. ad spend of $245.5 billion in 2003, the latest year for which figures are available. Sales figures were provided in the newly released Fact Pack
When the the Federated deal closes, experts
The outlook is less encouraging for the pending Kmart-Sears matchup. Kmart's ad budget, most recently reported at a bankruptcy-impaired $273 million, is a fraction of the $1.63 billion shelled out in all categories by Sears. Most observers believe Kmart pursued the deal because it sees big upside in selling the leases to several Sears sites. Fewer stores equals fewer ad buys.
Taken together, the ad budgets of the four retailers total $3 billion-ish. About two-thirds of those budgets go into the coffers of newspaper companies, representing maybe 4.5% of the industry's total sales of $45 billion.
Even as newspapers ponder the future of their relationships with the retailers, they already have lost their second largest advertiser, AT&T Wireless. Until it was acquired by Cingular earlier this year, the Ma Bell cellular spinoff had been spending $510 million annually on newspaper advertising alone (not counting TV and other media). Pre-merger, Cingular shelled out $645 million in advertising. Color much of that billion "gone."
The Cingular-AT&T deal is but the first of the telecommunications mergers likely to zap an enormous amount of ad-buying power.
SBC, which spends $1.5 billion a year on advertising, is buying the remains of AT&T, which itself is spending more than a billion a year. In all likelihood, the sum of the post-merger ad budgets will be considerably less than the $2.5 big ones flowing into the market today.
The story is the same but the numbers are smaller in the pending Sprint acquisition of Nextel. Sprint spends $477 million on advertising vs. an estimated $150 million by Nextel. Post-combo, look for the total to be lower.
Merger fever is fueled by the desire of top executives to get big, grab market share and cut costs, sort of like, say, Wal-Mart.
Oddly enough, the boys in Bentonville don't hold much with advertising. At the same time Federated-May spent 3.83% of their combined $30 billion in sales on advertising, Wal-Mart's ad budget reportedly was $428.6 million, or a meager 0.16% of its $262 billion in sales.
Ouch.
posted by Newsosaur at 3:54 PM
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