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'thirtysomething' Shows Peril of L.A. Agencies' Reliance on One Client

February 14, 1989|BRUCE HOROVITZ

When an ad agency goes down the tubes, the general public rarely notices. But when that agency happens to employ two co-stars of the popular ABC television show "thirtysomething," plenty of people notice--even if the agency is only real in a TV script.

During the past few weeks, the show has been tackling one of the most feared issues in the ad business: What happens when your biggest client dumps you?

Well, in the case of two "thirtysomething" co-stars, who together ran a struggling advertising agency, Michael & Elliott Co., it meant bankruptcy. "We felt there was enormous creative potential in seeing what happened if the ad agency failed," said Marshall Herskovitz, the show's co-creator and executive producer.

It might seem that a tiny, fictional ad firm on a TV show would be pretty far removed from the Los Angeles scene. But there is a striking similarity: the dependency on one large client.

The agency on "thirtysomething" happened to rely on a baked goods company. Many of the biggest agencies in Southern California depend heavily upon Japanese car makers. Executives say that in Los Angeles, more major agencies rely upon single, huge clients for the bulk of their business than in any other big city.

"When you're a small, struggling agency, you often have only two choices," said Dean Fueroghne, senior vice president at the Good Guise, a small Encino ad firm. "You either merge with someone else or you go under."

To make that point, last week Fueroghne's agency mailed hundreds of T-shirts with bold lettering across the front that suggests that the agency on the TV show has been acquired by what is in real life the world's largest ad firm, Saatchi & Saatchi.

The T-shirts spell out a newly merged "Michael & Elliott Co./Saatchi." This is the kind of long name that newly merged ad agencies tend to use, such as the recently merged mouthful, Della Femina, McNamee WCRS. A note along with the Saatchi T-shirt said, "It's hard to tell where the reality ends and make-believe begins."

"Sure," said Gerrold R. Rubin, president of Los Angeles' Rubin Postaer & Associates, which counts on Honda for about 60% of its business, "I've spent time in bed looking up at the ceiling wondering, what the hell would I do if I ever lost that business?"

For that reason, the agency has pressed hard for other clients--then tried to coax those same clients to boost their ad budgets. It has persuaded clothing maker Bugle Boy to triple its annual budget to $6 million over just the past two years.

But many Los Angeles agencies seem to be thumbing their noses at the industry's general rule of thumb: No client should represent more than 20% of an ad firm's business. Executives estimate that at least eight of the Los Angeles area's top ad firms depend on one client for more than half of their business.

"If an agency is dependent on one account, it's really skating on thin ice," said Fred Danzig, editor of the magazine Advertising Age. "But that seems to be a crap shoot that a number of Los Angeles agencies are willing to take."

It's mostly a matter of geography. The big packaged goods makers are mainly in the East and Midwest, so that is where many of their agencies are. That leaves West Coast agencies with little option but to rely on the film studios, the Japanese car makers and a mishmash of smaller clients for virtually all their business.

The Los Angeles office of the city's largest ad firm, Chiat/Day, counts on Nissan for about 80% of its business. And the Torrance office of Saatchi & Saatchi DFS, which creates ads for Toyota, estimates that nearly 90% of its business comes from the Japanese car maker. Similarly, the Culver City ad agency, Vic Olesen & Partners, says more than 60% of its business comes from Chevrolet. And Campbell & Wagman estimates that more than 60% of its business is generated by client First Interstate Bank.

What's more, Japanese car makers represent a majority of the ad business for Southland offices of Foote, Cone & Belding (Mazda), Rubin Postaer (Honda), Della Femina, McNamee WCRS (Isuzu) and Key/Donna/Pearlstein (Suzuki).

"There are only two bad consequences that could result from this," said Alan Gottesman, analyst at the New York investment firm Paine Webber. "The client leaves, in which case the consequences are clear. Or, the client doesn't leave, in which case you sometimes wish it did."

Agencies fight like the dickens to land those big Japanese car makers, which often spend more than $100 million annually apiece on advertising. And when the agencies win them, they are the envy of every other shop in town. But sometimes the agencies become so dominated by the client that they have a tough time landing other business.

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