Consolidation is the future of the media industry, the chief executive of the world’s largest advertising agency told CNBC Thursday.
WPP CEO Martin Sorrell discussed disruptions taking place in the market as major technology companies are putting what he sees as pressure on traditional content producers.
“We’re seeing certain pressures, technological changes in the long-term, and shorter-term pressure, and this is driving consolidation,” Sorrell said.
Amid a number of consolidations taking place or being deliberated, like the recent Comcast bid for U.K. broadcaster Sky or the potential merger of AT&T and Time Warner, Sorrell said that more than anything these developments are evidence of massive changes taking place in media as well as in his own industry of advertising. And many of those disruptions are being led by what he called the “fearsome seven.”
“The pressures that Amazon, Google, Facebook, Microsoft, Netflix, Alibaba, Tencent — the ‘fearsome seven’ if you take the top five companies plus the two Chinese companies — those pressures are causing consolidation,” the CEO described.
“On the content side, companies like Netflix and Amazon can pay significantly higher sums for an hour of content than traditional content producers. And that has created changes in the market, some would say distortions in the market, that are driving this consolidation.”
Asked who he would bet on in the bidding contest for Sky — Comcast chief Brian Roberts or Fox Chairman Rupert Murdoch — the WPP CEO was unforthcoming, but described both media heavyweights as “extremely acute.”
“Whoever ends up with Sky, however it ends up with Fox and Disney or AT&T and Time Warner … It won’t make that much difference to the industry as a whole,” Sorrell said, adding that “it’s not different to the situation in our own industry.”
“But it is emblematic of the changes taking place and there will be more. It is inevitable that there will be consolidation.”
Meanwhile, WPP announced its 2017 earnings Thursday. Shares dropped 8 percent as European markets opened with the firm reporting a drop in 2017 net sales, in what Sorrell described as “not a pretty year.”
Disclosure: Comcast is the owner of NBCUniversal, parent company of CNBC and CNBC.com.
