Total advertising spend in Japan dropped a mere 0.9 per cent last year to ¥6,058bn (£32bn), a surprisingly small decline considering the severity of the country’s economic problems. But the aggregate figures mask a grimmer picture. While spending on sales promotions was almost unchanged, media advertising dropped by 2.1 per cent – more than half in newspaper advertising. This was bad news for a handful of large agencies that rely heavily on newspaper advertising and are partly owned by the newspapers themselves.
For instance, about 60 per cent of tenth-ranked Asahi Advertising’s gross revenue is generated by newspaper advertising, even though newspapers account for only 20 per cent of Japan’s adex. Declining revenues obliged the agency to ask Hakuhodo to bail it out by taking equity. Hakuhodo declined, but invited the agency to join a media buying consortium it had formed with two other media-controlled agencies: Daiko Advertising and Yomiko. Viewed as a consolidation, the group has a media-buying share of about 18 per cent, compared with Hakuhodo’s share of about 12 per cent and Dentsu’s 24 per cent.
Whether the grouping will have the unity of purpose to affect the media buying landscape remains to be seen. However it does place three large agencies loosely under the Hakuhodo umbrella. This was a disappointment for third-ranked Asatsu-DK, which had been hoping to do something similar and challenge Hakuhodo for the number two slot. Despite a market share of almost six per cent, Asatsu-DK may prove too small to challenge either Hakuhodo or Dentsu without some radical ideas – which could well come from WPP Group, which owns 20 per cent of the agency.
While it is debatable how much restructuring is taking place in the ranks of the top ten agencies, the pressures lower down the hierarchy are clear to all. After talks lasting almost a year, Sony has sold 40 per cent of its loss-making agency Intervision to Dentsu. Reborn, the agency will handle all Sony’s advertising in Japan, as well as developing new media content. It will also have oversight of all Sony’s advertising in Asia, though how this will be achieved has yet to be worked out. According to Sony, their goal is to have one agency responsible for media in each major region – the US, Asia, and Europe – in order to save money and improve media performance.
Despite the problems, it is still too soon to pull the shrouds over Japan’s house agencies. Suntory-owned Sun-Ad has just bought another struggling medium-sized agency, Senkosha, in the hope that the merged company will be viable than the two individuallly.
For 2002, Dentsu forecasts a further 3.2 per cent decline in media spending. Again, the pain is most likely to be felt in mid-sized Japanese agencies and those that rely heavily on print media for their business. As the shake-out gathers force, there should be more opportunities for Western agencies. These will include both acquisitions, and opportunities to win large accounts, as Japanese advertisers search for better partners. Both JWT and Omnicom-owned I&S/BBDO have won major chunks of business so far this year.