Media Sellers Nix Buy Plan

No. In a word, that’s been the response so far from a handful of media companies that have been approached by PepsiCo and Anheuser-Busch InBev in a joint bid to combine their $1 billion-plus in media spending clout. Their goal is to obtain cheaper rates for advertising in the national TV, print and out-of-home sectors.

Sources familiar with the discussions say that Turner, NBC, Conde Nast, Time Inc. and others have all rejected the PepsiCo/A-B bid to jointly buy time and space at sharply discounted rates. One source involved said the marketing duo has sought rate cuts of as much as 50 percent compared to what they had previously been paying. Turner, NBC, Conde Nast and Time declined to comment.

A-B, which handles media buys in-house, did not return calls. PepsiCo rep Dave DeCecco declined to comment on specific talks, but told Adweek that the companies would continue to pursue joint buys as the industry heads to this year’s upfront market. The market begins in late May after the networks unveil their new programming schedules for the 2010-11 season.

Some believe, however, that the venture — as it pertains to media — isn’t workable and will be shelved. “It sounds like something baked up by people who are not familiar with how things get done in this business,” said Steve Farella, CEO at New York independent media shop TargetCast tcm. “My prediction is it goes away.”

The marketers’ effort stemmed from a joint purchasing agreement they entered into last fall. It was designed to save money on goods and services such as information technology hardware, office supplies, travel and facilities services, transportation, and maintenance, repair and operating supplies.

The agreement was expanded to cover media buys in late 2009. DeCecco said: “We’re looking for ways to reduce costs and reinvest savings back into our business.”

But Farella and others questioned how PepsiCo and A-B figured their $1 billion in annual buying clout (per Nielsen) was heftier than the $13 billion-plus that media shop OMD, a unit of Omnicom that handles media chores for PepsiCo, brings in total to the table. “And why would a network risk offending all of OMD’s other clients by giving Pepsi and A-B a better deal?” said Farella.

The nets are “telling Pepsi and A-B that their proposal is ‘unrealistic,'” said a source familiar with the conversations. “And they’re telling everybody else that it’s ridiculous.”

Sources said talks have become testy. One noted that when Conde Nast told the marketers the publisher would not negotiate with them as a single entity, PepsiCo and A-B threatened to pull their advertising. Subsequently, however, said the source, A-B went back to the publisher and told execs it intended to advertise in the publications. He did not know whether PepsiCo had done the same. Both A-B and PepsiCo declined to comment on the matter.

“There’s definitely some frustration on the part of [PepsiCo and A-B] at not being able to achieve what they had hoped,” said a source familiar with the situation.

OMD also declined to comment, although sources said the shop has provided advice and assistance to PepsiCo (OMD’s largest client) and A-B as they’ve tried to buy their own ads. And DeCecco stressed that the media procurement effort was not in any way designed to supplant the role of OMD. “There’s plenty of work to go around,” he said, noting that for now PepsiCo and A-B are focused on price negotiation only for the three media specified, while the agency continues to handle all other buying and planning activity, as well as strategy and areas such as analytics and ROI.

Sellers also noted that the current TV market, with rates up 25 percent or more from the upfront, provides little incentive for the networks to go along with the plan. Additionally, Farella said, the market is still very manageable for buyers. The PepsiCo/A-B proposal, he said, “is an extreme measure at a time when you don’t really need extreme measures.