L.A. Agencies Are in Need of a New Image : Advertising: Activity is way down, and the area's hallmark--creativity--is languishing. Many clients want to play it conservatively during the recession.

By BRUCE HOROVITZ

May 19, 1991 12 AM PT

TIMES STAFF WRITER

Dan Wieden opened and closed the Los Angeles branch of his Portland, Ore., ad agency faster than you can say Bo knows.

“There was a time when our antenna was focused on Los Angeles far more than, say, New York or Chicago,” said Wieden, president of Wieden & Kennedy, which made Bo Jackson an advertising star. Since closing his hard-pressed Los Angeles office in 1989, Wieden has not looked back.

“I don’t think Los Angeles is the center of the advertising universe right now,” he said. “There’s a general ether that seems to be in the air. It’s become very quiet down there in terms of advertising energy.”

If the advertising business is all image, it would seem that the industry in Los Angeles is ready for a complete make-over. After years of sparkling success, recession--combined with the inherent limitations of creating ads in a market with only a few big clients--has put the industry in the doldrums.

Los Angeles was never destined to become as big an advertising market as New York or Chicago--headquarters of most of the nation’s top 20 ad agencies. Los Angeles lacks proximity to enough of the giant packaged goods advertisers such as Procter & Gamble and RJR Nabisco.

But what the local industry lacked in size, for a time it compensated for in creativity. Now that creativity has mostly disappeared as local agencies--held back by nervous clients more interested in promotions that move merchandise fast--are churning out ads that look much like the standard fare elsewhere.

This is a far cry from a few years ago, when the nation’s eyes were focused on the world-class campaigns coming out of Los Angeles. The antics of the drum-beating Eveready bunny--which walked out of one commercial and into another--were a local invention. So was that compulsive liar, Joe Isuzu.

The Zen-like Infiniti car ads that showed lots of rocks and trees--but no cars--were crafted here. And the Honda ad featuring a car hanging sideways on an art gallery wall was the brainchild of a local agency.

What great concepts has the Los Angeles ad community concocted over the past year? None.

The Eveready bunny is banging the same tune for a second consecutive year. Infiniti got religion and is showing its cars with reckless abandon. And the honest-to-gosh truth is, no one ever could come up with a suitable replacement for the fibbing Joe Isuzu. In fact, the agency that created him was fired earlier this month by Isuzu.

Yes, Los Angeles has lost some of its brilliance, said Jay Chiat, chairman of Chiat/Day/Mojo, the agency that creates ads for Nissan and that set the Eveready bunny roaming. “But I don’t see it coming from anywhere.”

Regardless, Los Angeles agency clients are going elsewhere.

Earlier this month, Carl’s Jr., one of the biggest fast-food advertisers in the area, fired its Los Angeles agency and hired a San Francisco firm to create its ads.

Los Angeles agencies were embarrassed two months ago when judges for the West Coast’s most prestigious advertising competition, the Belding Awards, handed out 40% fewer awards than the year before. No agency won the contest’s top prize.

“None of us ever thought Los Angeles could be the biggest ad center, but many of us believed we could be the most exciting,” said Bruce Silverman, president of Asher/Gould Advertising.

The excitement may be gone, but it’s not because the city’s ad community lacks talent, some ad executives said.

What’s lacking, they assert, is the devil-may-care attitude that once set Los Angeles advertising apart. “Now, no one wants to take a risk,” said Tom Burr, director of client services at the Los Angeles office of Hakuhodo Advertising. “Everyone’s afraid to be wrong because it may mean getting fired.”

Although many people say there is a mystique to Los Angeles advertising, Dennis Kuhr, executive vice president of the Los Angeles office of J. Walter Thompson, doesn’t believe that for a minute. “Great advertising is wherever a good art director and a good copywriter are,” he said.

Others contend that agencies aren’t the issue. “The current lack of creativity in our ad community is a byproduct of the pessimism of their clients,” said Charles Sharp, an advertising industry headhunter. “When people don’t believe business is good, they don’t want to take chances with anything--and that includes their advertising.”

Not only are clients becoming more conservative, they’re spending less.

“When clients are being squeezed, they often take a whack at their ad budgets,” said Peter Stranger, president of the Los Angeles office of Della Femina McNamee. His shop’s annual billings have plummeted to below $80 million from $198 million a year ago. His staff is down more than 44%.

Della Femina and J. Walter Thompson have taken the biggest hits the past year. One year ago Thompson posted $200 million in annual billings; today it’s about $90 million. A year ago the agency had 200 employees. Today it has fewer than 100.

These recent troubles are not aberrations. Over the past four years, at least nine advertising agencies--many of them of national reputation--have closed their Los Angeles offices.

Among them, Abert, Newhoff & Burr was at one time viewed as an agency to watch. And although not officially closed, Keye/Donna/Pearlstein is but a shell of its former self. The agency, which once created ads for Suzuki, is down to one small client and a skeleton staff.

When local ad agencies suffer, so do a host of related industries. The commercial film production industry is generally down. Firms that service the production companies--ranging from camera suppliers to design studios--have seen their business dip too.

Most agencies have cut way back on luxuries that used to be considered part of the business--like ordering flowers for clients or catering lavish affairs.

Executives who run Los Angeles agencies believe that most of the changes are permanent. Some say the consolidation of local agencies is a good thing.

“What’s going on is very healthy,” said Jack Roth, president of Admarketing. “While no one wants hard times, I think it’s a necessary cleaning-out process that makes American business stronger.”

Some agency executives who gave up on the city said their hopes for the business in Los Angeles were never realistic--even before recession.

“What I learned in Los Angeles in my five years there is it’s a pretty small town,” said Richard Kelly, who was president of the Los Angeles office of Scali, McCabe & Sloves before it closed in 1988. He now heads a successful Toronto agency, Ambrose Carr Linton Kelly.

“If you take away the Japanese car advertisers and the movie accounts, you have very little left,” he said. “It’s very difficult in Los Angeles to create a well-rounded agency.”

Most big agencies in town rely on Asian auto makers.

Chiat/Day would be about half its size without Nissan. Saatchi & Saatchi DFS Pacific might not be here without Toyota. Nor would Foote, Cone & Belding without Mazda. And where would Rubin Postear & Associates be without Honda?

By one estimate, Asian auto makers account for nearly half the advertising billings in Los Angeles.

This is not to say that some Los Angeles agencies haven’t overcome the odds and thrived here--even during the recession. Chiat/Day/Mojo and Admarketing have picked up lots of business from new clients in the past year. Team One Advertising, which creates ads for Lexus, has also emerged as a powerhouse.

And a number of smaller agencies--including several minority-owned ad shops--say business has improved.

But the numbers say it best. One headhunter conservatively estimates that unemployment in the Los Angeles ad community is at 20%--and rising. Others say it may exceed 30%.

Despite the consolidation, the city may still have too many agencies for the size of the market. There are an estimated 250 agencies in the Los Angeles market--the vast majority tiny shops with a few small clients. Fewer than 50 have annual billings in excess of $15 million. And fewer than 20 post billings of more than $100 million--an industry benchmark that separates the big from the small.

While agencies in Los Angeles ranked third last year to New York and Chicago in annual billings--the amount that agencies bill clients for creating and placing all advertising--growth in billings is falling. While annual ad billings in Los Angeles were up 17.5% in 1989, compared to 1988, growth dropped in half last year to 8.4%. By some estimates, billings growth this year may be next to nothing.

That is not just a Los Angeles phenomenon. The recession has resulted in a national advertising drought. But the effect can be more devastating in Los Angeles.

“Los Angeles is in worse shape because it’s a town of agency haves and have nots,” said Bob Wolf, North American chairman of Chiat/Day/Mojo. “What’s happening is the strong are getting stronger and the weak are shaking out.”

Some say the immense success of Chiat/Day, which grew from a $300-million agency to a $1-billion one in about three years, is partly responsible for some of the problems plaguing other Los Angeles agencies.

“The one thing that would do the most for the Los Angeles ad market would be for some Los Angeles agency to emerge as a strong competitor to Chiat/Day,” said Andy Berlin, co-founder of the fast-growing San Francisco ad shop Goodby, Berlin, Silverstein. “When you have one shop dominate a market--or even appear to dominate a market--it’s not good. They can make other shops who aren’t bad look very bad. That’s good for Chiat/Day but not good for Los Angeles.”

Others say that by constantly trying to mimic Chiat/Day’s work, many agencies are hurting themselves. “Everyone looks at what Chiat/Day is doing instead of trying to do creative, innovative stuff themselves,” said Gene Cameron, president of the Los Angeles office of BBDO Worldwide, which creates ads for Apple Computer.

As gloomy as things look now, “the death of Los Angeles advertising is greatly over-exaggerated,” said Stan Freberg, the veteran Los Angeles advertising pundit who has never felt timid about knocking his fellow ad aficionados.

“Has Los Angeles lost a little bit of its glow?” posed Brad A. Ball, president of Davis, Ball & Colombatto, which creates regional McDonald’s spots. “Maybe for 30 seconds.”

Top 10 Cities by Annual Ad Billings

City 1990 Billings 1989 Billings % Change 1 New York $24,728.4 $23,003.4 7.5 2 Chicago 6,867.1 6,521.7 5.3 3 Los Angeles 4,321.9 3,988.1 8.4 4 Detroit 3,609.4 3,433.4 5.1 5 San Francisco 1,922.6 1,477.2 32.8 6 Dallas-Ft. Worth 1,302.7 1,198.3 8.7 7 Minneapolis 1,091.3 1,024.8 6.5 8 Boston 922.8 940.5 (1.9) 9 Atlanta 861.1 782.7 10.0 10 Philadelphia 830.1 769.7 7.8

All figures are in millions of dollars. Source: Advertising Age.

L.A. Exodus Bigger agencies began leaving in 1987, when Nissan took its business away from William Esty Co. and gave it to Chiat/Day. Since then, at least eight other agencies have left.

Agency Name Year Office Closed William Esty Co. 1987 Scali, McCabe, Sloves 1988 Wieden & Kennedy* 1989 Abert, Newhoff & Burr 1990 Hal Riney & Partners* 1990 Albright/Labhart 1990 Scott Lancaster Mills Atha 1990 Castellanos Latina Adv. 1991 Good Guise Advertising** 1991

* Service office that only assisted a client or two.

** Agency has re-established itself as Great Guise and may merge with another.

Agency: Chiat/Day/Mojo Current clients: Nissan, Eveready Past clients: Apple Computer, Nike Status: Largest agency in Los Angeles--and growing. Agency: J. Walter Thompson/Los Angeles

Current Clients: Vons, Mexicana Airlines

Past Clients: Bally’s Health & Tennis Corp., Twentieth Century Fox

Status: Lost about half of its business in past year.

Agency: Della Femina McNamee/Los Angeles

Current Clients: California Federal Bank, Sega of America

Past Clients: American Isuzu, Carl Karcher Enterprises

Status: Lost about half of its business in six months.