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ASCENTIAL BLINKS IN CANNES LIONS STANDOFF: After last year’s “biggest and best ever” Cannes Lions Awards Festival several agency holding companies began saying they would trim down their presence in 2018, and Publicis went so far as to the say they would skip Cannes altogether in 2018. Why this reaction? Because Cannes has been getting too big and too expensive for its own good. Over the years Ascential, the owner of Cannes Lions, started adding more and more award categories. More categories meant more client nominees, which forced agencies to pay for more clients to attend. But 2017 appears to have been the tipping point, as described in the attached AdWeek link. In a reactive move Ascential has agreed to trim down the overall number of nominations and put restrictions on how many times a piece of creative can be nominated. These moves, combined with a reduction in attendee admission costs and discounting for hotel, meals, etc., are designed to make Cannes Lions more reasonable to participate in. The changes are apparently enough for Publicis, who’s saying they will recommit to Cannes 2019 (yes, they’re still taking 2018 off). Overall it’s a step towards cost savings sanity for the entire industry. Now can somebody work on lowering those rose’ corkage fees for me?!?
COULD LBOs BE KILLING RETAIL FASTER THAN AMAZON?: Yes, we all know the Retail Apocalypse is upon us. With more purchases migrating online the term Brick & Mortar is fast becoming a dirty word. But what if the financial problems in the Retail sector are really being caused by structural debt and not just competition? In the attached link Bloomberg puts forth the theory that decades of LBOs (Leveraged Buyouts) of retailers have created debt-laden parent companies who can’t pay their bills. These buyouts occurred over the past 10-20 years when sales projections for traditional retailers looked like a steady up-to-the-right line which would go on forever. But then as Ecommerce started to take a bite out of their businesses, heavily leveraged retailers had no margin for error to survive the transition. This explains why seemingly healthy retailers like Toys “R” Us is in Chapter 11, and Sports Authority went out of business altogether. And the worst part of this story is Bloomberg’s prediction that the bad times for Retail are just getting started. As you can see in the image below Retail loan delinquencies are on the rise, which is a foreshadowing of more store closures to come. Fair warning that this article is really deep – there are graphs in here you’ve never seen before. But if you want a MBA-level dissection of Retail’s debt problem, this one’s for you.
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