Edition, August 2, 2000, Page 1
BUYS CUNNINGHAM FOR $75M
Group, London, which operates Citigate in the U.S. and which
recently purchased Sard Verbinnen, added Cunningham Communication
to its roster for up to $75 million in stock and cash over
the next three years.
based in Palo Alto and founded in 1985 by Andrea "Andy"
Cunningham, had $23.5M in fees in 1999 and 140 employees
as of Dec. 31.
will go to her, Joe Hamilton, president and COO, and about
a dozen other executives. Cunningham was with high-tech
pioneer Regis McKenna before starting her firm. Abbott Jones
of AdMedia Partners represented the firm in the transaction.
of Incept was up about three pence last week to 151 on the
London Stock Exchange. It paid $59M in stock and cash last
year for Sard Verbinnen, a financial firm with $7.5M in
has revenues of about $200M and employes 1,500. Cunningham,
who continues as CEO, will report to David Wright, CEO of
Incepta. The firm will operate as Citigate Cunningham.
include CiscoSystems, Hewlett-Packard, Motorola, Pitney
Bowes and many smaller firms.
Dallas, financial services unit of DaimlerChrysler Services,
is looking for a national PR firm. Douglas Rozman, head
of media relations, said the company prefers a local agency
that is part of a large network. Some firms have been contacted
based on their Internet experience... Interpublic's second
quarter net fell to $136 million, or 45 cents a share,
because of $52M in charges related to the restructuring
of Lowe Lintas & Partners. Revenues were up 15% to $1.4B.
The stock dropped about four points last week to $40, still
far below its high of $58 before announcing its acquisition
of NFO Worldwide... True North's second quarter net rose
29% to $27M, sending the stock to a new 52-week high
of $49. New business wins totaled $537M and included Compaq
Computer and Boeing... Richard George, who was promoted
to principal and director of business operations, Publicis
Dialog/New York, in May, joined Ogilvy PR Worldwide as VP-technology.
He was PR director of PRSA until last October... Matthew
Gonring, managing partner, worldwide comms. at Arthur
Andersen & Co., will join Baxter Int'l as VP-CC around
Labor Day... Randy Zane to United Way of New York
as director, media rels. He was PR manager, CMP Media.
BASEBALL NAMES ISRAELI PR FIRM
Major League Baseball Int'l named Coast2Coast Communications,
Israel, to promote baseball in Israel, Jordan and The Palestinian
Charles Harris, who was on the PR staff of the Los Angeles
Dodgers four years, opened the PR firm in 1996 with Aaron
Weil, former Washington, D.C., lobbyist. The firm has eight
staffers and handles Dealtime, Versaware, and Virtual Jerusalem.
Israel Assn. of Baseball, started in 1986, has 71 teams
and 1,000 players including some Palestinians.<%0>
Ricci, a principal and head of research and development
at Cunningham Communication, joined client CiscoSystems
as VP of marketing. He helped develop CC's "Momentum
Management," which applies statistical research and
diagnostic tools to build brands of tech and Internet clients.
1999 LOSS IS $426,288, SAYS D&T
The long-awaited 1999 audit of PRSA has been published showing
an operating loss of $426,288 instead of the $43,000 that
had been predicted to the Assembly last year. The figure
is also well above the loss of $83,853 reported earlier
this year in an unaudited statement.
One reason for the increased loss is that Deloitte &
Touche has upped the deferred dues account from $198,746
to $425,309. PRSA, unlike the American Society of Assn.
Executives and most other groups, has been claiming that
dues income does not carry a liability for future services.
A letter July 25 by PRSA chair Stephen Pisinski to the membership
says PRSA will now "be in compliance with the method
used by the ASAE" and that new computer software will
"calculate dues income as it is earned."
Deferred Amount Is Still Small
However, the amount being set aside for future services
is a small fraction of PRSA's dues income of about $3.3
million ($175 X 19,000 members).
The ASAE itself, with $5.1M in dues, sets aside $2.74M in
a deferred dues account. The American Medical Assn., with
dues of $66M, has $40M in DD. The American Bar Assn., as
of Aug. 31, 1999, had $65.7M in dues income and deferred
$50.1M of it. IABC defers $1.37M of its $2.3M in dues.
If PRSA put the usual six months or more of
on page 7)
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Edition, August 2, 2000, Page 3
MAY REJECT THIN MODELS
Editors from several British-based women's magazines, including
Marie Claire and Vogue, agreed to monitor
women in news pages and ads at a Body Image Summit that
was held last month in London.
The summit was organized by Tessa Jowell, Britain's minister
of women, after a report from the British Medical Assn.
linked the country's rise in eating disorders to the news
media's obsession with thinness.
About 40 representatives from the British government, medical
groups, youth organizations, clothing manufacturers, ad/PR
agencies, broadcast companies, fashion magazines and major
London newspapers attended the summit.
Liz Jones, who is editor of Marie Claire, which recently
put talk show star Rosie O'Donnell on its cover, went on
record saying: "A code of self-regulation would mean
if an (ad agency) sent us a very thin model whose bones
were showing through her skin, we would send her back and
write the agency as well as other magazines telling them
not to use her."
"Some girls are naturally very small but we have decided
not to use girls who are known to have an eating problem.
We also have a policy not to use girls of a certain age,"
said Jones, who has spoken publicly about her own eating
Same Old Sizes
Alexandra Shulman, editor of Vogue, who agreed that joining
together for the cause was a good idea for leading fashion
publications, told The London Daily Telegraph that
Jones "gave a presentation which led one to believe
Marie Claire had suddenly morphed into Health
Weekly"when in fact "it's a women's magazine
whose recent issues featured models with exactly the same
statistics as models in Vogue--approximately 33-22-34--not
a lot of groundbreaking in that."
Shulman said designers at the summit thought "schools
could do more, magazine editors thought retailers should
change their sizing, TV presenters felt that editors should
use bigger models, therapists felt that rot began at home
and four seemingly confident and attractive teenage girls
representing their generation felt that we were all to blame."
Julia Robson, deputy fashion editor at the Daily Telegraph,
said Brazilian fashion models, who are increasingly in demand
these days, could be a positive trend for women everywhere
because those models will help bring in fashions that need
Robson said many European models are "slightly frightening"
because they are tall and thin, while American models are
`more perfect' looking because American magazines use more
Hillary Alexander, fashion editor of the Daily Telegraph,
also wondered why no one discussed the increase in average
body weight among British women and men at the summit. About
one in five individuals are classified as obese, said Alexander.
MEDIA NETWORK IS LAUNCHED
a new Internet/TV hybrid, was launched by Chicago-based
Weigel Broadcasting and Bridge Information System.
One difference between WebFN and the other business Internet
sites and business news outlets on cable is a system that
eventually will let viewers watch a traditional business
newscast while they access financial data via the computer
or on TV.
The network also plans to build a system that allows reporters
to interview various stock analysts and other business news
sources on camera from their offices, and to tap into BIS's
worldwide reporting network, as well as a video-on-demand
Bob Reichblum, former VP of primetime programming for CNBC
and a former executive producer for ABC's "Good Morning
America," is the architect behind the new venture,
which is owned by Weigel, which produces "The Stock
Market Observer," a decades-old TV show, and BIS, a
New York-based business news provider.
During the testing stage, viewers can get about eight to
10 hours a day of live business and financial news reporting
by watching their computer. The TV version will come later.
WCIU-TV and WFBT, the two Chicago stations Weigel owns,
will eventually carry some WebFN content.
Lynn Holley, who was previously a reporter for WMAQ-AM in
Chicago, currently hosts three separate one-hour shows,
at 8 a.m., 10 a.m. and noon.
The other reporters are David Jennings, who also was at
WMAQ radio before joining WebFN; Jack Taylor, who hosts
"The Stock Market Observer," and Gary Salem, a
veteran Chicago broadcaster.
STATION EXITS DIAL FOR 'NET.
KACD, a small radio station in Santa Monica, stopped sending
its over-the-air signal and began transmitting exclusively
over the Internet.
Worldclassrock.com can be picked up in any time zone via
a computer and a phone line.
REVENUES CLIMB AS CIRC. DROPS.
Overall, magazine revenues grew slightly in 1999, according
to Folio magazine's 8th annual study.
Total revenues of $27.6 billion were up from $26.1 billion
in 1998 and $24.9 billion in 1997.
Other trends included a downturn in circulation (only 204
of the 500 titles showed total circulation gains, down from
252 in 1998, and 163 registered losses, up from 132 in 1998);
and a boom in Internet-focused magazines.
Top performers in the Internet category include Red Herring,
up 53% in revenues and 93% in circulation for the year;
Business 2.0, up 213% in revenue and 48% in circulation;
and Yahoo! Internet Life, up 163% in revenue and
65% in circulation. Fast Company was up 20% in revenues
and 49% in circulation.
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Edition, August 2, 2000, Page 7
AUDIT OF PRSA RELEASED (cont'd)
dues in a deferred account ($1.65M), it would not be able
to claim "unrestricted net assets" of $1.48M,
as it now does. Payables exceeded receivables by $300K+
on Dec. 31, 1999.
Heavy Spending on Computers
The value of PRSA's computer equipment jumped from $563,124
at the end of 1998 to $993,437 at the end of 1999, a gain
Pisinski's letter noted that both the awards program and
the annual conference lost money last year rather than "making
their usual profits." Conference revenues were $880,907
but costs were $922,228.
The National Investor Relations Institute, which has encouraged
exhibitors while PRSA closed its exhibit hall in 1995, grossed
$2.2M on its conference in June in San Francisco.
The audit by D&T shaves $45,000 off the accounts receivable
of $544,097 that had previously been claimed. The new total
of receivables is $509,097 with $7,000 described as "doubtful."
It is a tradition at PRSA that only $7,000 of receivables
is considered doubtful. It was $7,000 in 1989 when receivables
were only $106,129.
John Colletti, a CPA from D&T, is working full time
at PRSA as a temporary replacement for Joe Cussick, who
quit as CFO in June. Cussick said he no longer wanted to
do the commute between New York and Randolph, N.J., and
has his own financial planning practice. Randolph is about
40 miles from New York.
McDermott Says Not Given Audit
Michael McDermott, last year's official candidate for treasurer
of PRSA and who again ran for the nomination for treasurer,
said the nominating committee did not treat him "fairly"
because he did not get the D&T audit while it was given
to his opponent for the nomination, Reed Byrum, a director.
Also getting the audit as a member of the board was Art
Stevens, nominated for chair-elect.
McDermott said his presentation to the committee would have
been "completely changed" if he had had the up-to-date
figures. "It's as if my candidacy was doomed before
I even entered the room," he said. "I did not
know I was wasting two days plus hundreds of dollars only
to find out the playing field was anything but level...why
didn't PRSA disclose the audited numbers on its website?
I believe the 20,000 members deserve an honest, complete
and timely answer from those responsible for this fiasco."
Mary Cusick is chair of the nominating committee.
Two Directors' Posts Unfilled
The nominating committee was unable to find members to represent
two districts, the first time there has been such a void.
No one ran from the Northeast in 1997 and Robin Perrin was
eventually appointed to the post by the board.
The Northeast district again lacks a candidate as does the
Nominated to represent the Midwest was Dean Kruckeberg,
Univ. of Northern Iowa; Tri-state, Grace Leong, Hunter &
Assocs., N.Y.; open representation, Carold Gorney of Lehigh
University, Bethlehem, Pa., and Michael Jackson, Dow Corning,
Midland, Mich. (brother of 1980 PRSA president Patrick Jackson).
NEW DIGS SPORT A REC ROOM
is moving its worldwide headquarters and New York operation
from 292 Madison ave. to 711 Third Ave. (between 44th and
main phone number is now 646/935-3900.
Kotcher, CEO of Ketchum, which is owned by the Omnicom Group,
said the New York office has grown 100% in the past three
years, and "this move will allow us to accommodate
that growth and provide future capacity," The new offices
occupy nearly five florrs and 80,000 sq. ft of space.
new offices feature focus group facilities within the Communications
Training Center's Schenker Studio and an expanded graphics
studio and full-service vidoe edit suites.
new offices also feature a "think tank" room,
a series of laptop portals in the reception area, conference
rooms with plasma screen technology, a Chase Manhattan ATM
and an Adirondack style "rec room."
FACE NEW SANCTIONS
World Diamond Congress has imposed new measures to stop
African rebel groups from selling gems to pay for African
wars, according to The Associated Press.
AP said the new measures include a certification system
to track rough diamonds from the time they are mined as
well as penalties against dealers who break U.N. embargoes
on diamond sales by rebels in Angola and Sierra Leone.
will immediately close off all the legal loopholes, by which
conflict diamonds may currently be entering the market,"
said a statement issued at the end of the WDC meeting, held
July 19 in Antwerp, Belgium.
on the diamond trade had come from the U.N., Western governments
and human rights groups, which warned of a consumer backlash
against the $6 billion-a-year industry unless it cuts with
rebels behind some of Africa's most brutal civil wars.
men will require proof that the diamonds they place on their
fiancees' fingers have not been the cause of the amputation
of a finfer, or an arm, of a person in Sierra Leone,"
Robert Fowler, Canada's U.N. Ambassador told the WDC. He
urged the diamond industry to take the "lead in demonstrating
publicly that its products are conflict free."
mined and sold by De Beers Consolidated Mines will bear
the name of Diamond Trading Company or D.T.C., as a guarantee
to retailers that the diamonds were mined under humane work
conditions from reputable mines, said Joan Parker, who is
director of the Diamond Information Center, run by J. Walter
Thompson, the ad agency for De Beers.
said the D.T.C. monogram and logo, called the "forevermark,"
will show up on ads, though not necessarily on the jewelry
Edition, August 2, 2000, Page 8
and auditor Deloitte & Touche are finally letting the
reality of PRSA s finances seep out but both have a
long way to go before members get a true picture.
The numbers reveal where the power lies at PRSAin
the staff. Staff payroll of $3.15 million is 40.4% of revenues
of $7.8M. The
average payroll costs of groups in the $5-$10M range is
26.8% and the median is 26.2%, says the American Society
of Assn. Executives.
PRSA has one of the most generous pension plans going8%
of pay for all employees and an additional 13.7% for wages
over $62,700. Top staffers also have their own expense accounts.
COO Ray Gaulke s was $49,000 in one recent year, or nearly
$1,000 a week, according to a tax filing.
PRSA spent $581,877 on staff and member travel in 1999,
up 27.4%. Why all this traveling when so many forms of electronic
communication exist? The APR and ethics boards now get their
travel paid ($19,389 and $17,278, respectively) where they
didn t a couple of years ago.
Only a couple of PRSA members are ever allowed to work at
h.q. because the mostly non-New York leadership of PRSA
doesn t want too much power in New York in the hands of
However, PRSA members don t get to see how <%-2>their
money is spent on a day-in, day-out basis. Power<%0>
flows to the staff, which is obviously making many key decisions
no matter what board policy is set.
The poor financial results reflect bad choices in many areas.
The loss on the unpopular APR program was $326,434 in 1999;
the national conference, having closed its exhibit hall
when exhibitors are crying for venues, lost money; the awards
program also lost partly because the PR Week and Inside
PR awards programs are getting so much attention (PR Week
was brought to the U.S. with the enthusiastic assistance
of PRSA staff and officers but without full board approval);
PRSA has two publications when it can only afford one, especially
in view of the many legitimate publications now in the PR
field; $93,229 was spent in Code of Ethics revision when
there has been no visible enforcement of the current code
for many years. The weak code doesn t even force counselors
to disclose clients when questions arise.
What is sad about the PRSA nominations is that no one can
be found to serve from two of the districts after a year
of trying, which has never happened before. Who wants
to serve on a board where you are muzzled for life? You
must sit idly by while noxious policies like a year-long
press boycott are enforced. You become part of a conspiracy
to withhold important facts from the membership such as
the $880,000 in payables.
The unfair treatment given Michael McDermott, candidate
for treasurer, is illustrative of the politics of PRSA.
He was not given the audit while it went to other candidates
who were on the board. He may openly run for treasurer,
discussing all the issues at hand. Art Stevens, meanwhile,
nominee for chair-elect, has said he prefers to discuss
the issues only in front of the Assembly, the "duly-elected
representatives of the 20,000 members." However, only
APRs can be elected to the Assembly and 16,000 of the members
are not APR.
The British tend to overpay for their acquisitions,
an international business exec told us in relation to Incepta
paying $75M for Cunningham Communication. Incepta paid almost
eight times sales for Sard Verbinnen. Shandwick paid large
multiples of annual sales for many of its 30+ purchases,
running up a debt of $100M. With these kinds of offers being
thrown around, U.S. conglomerates such as Omnicom and Interpublic
are priced out of the market... the retirement of Kathie
Lee Gifford from her ABC morning show brought up the
subject of her company s use of cheap foreign labor to make
clothing. Columnist Phil Mushnick of the New York Post<D>
said Gifford has been unfairly pilloried for a situation
she corrected while the press has wimped out on Michael
Jordan s 17-year association with Nike, long a user of foreign
labor. Jordan, according to Mushnick, blamed retailers for
setting high prices of $150 and up for Jordan-signature
sneakers. But Nike sets those prices to keep profits up
while holding costs down with cheap labor, wrote Mushnick
July 28... PRSA should take back the title of "president"
from the staff. The idea, backed by 1980 PRSA president
Pat Jackson, was to have "vice chairs" who would
head important committees and travel the country promoting
PR. This never happened... Michael Jackson, new board
member from Midland, Mich., is the brother of Patrick
Jackson... we asked IABC why Deloitte & Touche designates
about six months of dues as a liability on the IABC balance
sheet. "Because we told them to," was the
answer from spokesperson Shel Holtz... the treasurer
s post at PRSA was usually held by a New York PR pro some
years ago so that a close eye could be kept on the books.
The mania for geographical balance sent the post all over
the country... "the sisterhood of PRSA"
is not happy about Art Stevens trying to leapfrog over the
secretary and treasurer s posts to become chair-elect ahead
of Joann Killeen, who has served in both posts, a member