The Future Gospel According to Sir Martin Sorrell: Content Ownership is King

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"We have to treat media owners almost as we do our clients," advises Sir Martin Sorrell, chairman and chief executive of WPP. At the recent National Association of Television Programming Executives conference, Sir Martin urged both legacy and new media owners to understand WPP's strategy. In the following report, I share direct comments from Sir Martin and draw conclusions about the company's future growth strategies, which appear to be to acquire and develop principal positions in media content and work closely with WPP clients, media owners and content distributors to exploit those rights. Sorrell announced an expanded programming and content division within WPP's Group Mthat will position the company as a proactive global content producer across multiple platforms.

Dependence exclusively on legacy business models is not consistent with the future gospel according to Sir Martin. "If we think the pace of change has been rapid, just stand by," he warns. There is a generational shift taking place in companies. When leaders of companies change and new generations take control, the attitudinal shift in these companies is enormous. Inherent in this warning is acknowledgement of the accelerating trend toward marketers shifting budgets from legacy media to social media, mobile, search and online video. (See Myers 2000-2010-2020 Media Investment Forecast.) "Legacy media owners are very challenged," he said. "New media companies are hungry. We intend to be in the forefront of this new opportunity."Group M Entertainment, headed by television veteran Peter Tortorici was formed several years ago to produce network television programming for and with clients, but Sorrell's comments suggest a far more expansive business model focused on content development, production and distribution across all platforms.

Sorrell points out that in the current model, media owners try to sell pre-packaged and pre-ordained packages. In the future, he argues, "they will need to understand what clients want and how they are going about achieving their individual goals." Implicit in Sorrell's comments is the clear trend toward marketers integrating content into their marketing mix and the reality that agencies are better positioned to respond to this changing dynamic than are media companies. (See Marketers are Becoming Media Companies). The challenge for Sorrell and WPP will be to structurally reorganize and define the best models for profiting from an aggressive commitment to developing and acquiring content rights.

In the U.S., clients -- and not agencies -- own the relationship with media sellers and as I pointed out in my Top 10 Issues Confronting Marketers, Agencies and Media, "whether the agency should have more opportunities to own the media relationship directly is an important issue for the future. Agencies … have multiple opportunities to profit from creativity, knowledge, asset ownership, insights and technological capabilities. In many instances they are prevented from doing this by U.S. legacy requirements of transparency and deal-ownership. Agencies are relegated to being commoditized buyers of inventory. This is one of the most critical issues that will be debated and will determine the future health of the industry."

By focusing on production, distribution and consumption of content, the chairmen of WPP and Group M are restructuring the fundamental economics of the media seller, agency and advertiser triumvirate, positioning WPP to profit from international, merchandising and other backend rights to the content it develops and acquires. In the mid-1990s ten leading global advertisers including General Motors, Coca Cola, AT&Tand MasterCard contributed several million dollars to a programming development consortium (Television Production Partners) that accrued these backend rights for the clients rather than the agencies.

As the world's largest agency conglomerate with $15 billion in revenue on $70 billion in billings and operations in 107 countries, WPP has the global relationships to effectively position itself as a major content producer and distributor across multiple platforms. It also has the organizational resources, capabilities, expertise, experience and, most importantly, the management commitment from the very top. In this context, WPP and Group M can be expected to become active in the content sales and distribution business, including building relationships with consumer electronics companies, pay television companies like HBO and Showtime, Netflix, Roku and other non-traditional agency partners. It's not inconceivable that, in the near future, WPP could negotiate for global sports rights and rights to high profile live programming. Sorrell described the company's investment in China's "We've Got Talent"as a template for future deals.

More than a decade ago, Group M Chairman Irwin Gotlieb explained to me that the long-term growth of his company depended on the ability to leverage ownership rights to media properties. Several of the company's investments, such as addressable TV company Invidi, Buddy Mediaand Wild Tangent,among other content-centric companies and have been responsive to that goal. While most of the major agency conglomerates/holding companies are actively engaged in content development, the vision and plan of WPP has been evolving for years and can be expected to dramatically impact the traditional relationship between the company and its media partners. At NATPE, Sir Martin asked media companies to understand WPP's strategy. They will be well served to do just that.