OVERVIEW OF THE DENTSU GROUP

Transcription

1 OVERVIEW OF THE DENTSU GROUP Japan is the second largest advertising market in the world, after the United States, and for many years the Dentsu Group has held the largest share of the Japanese market. Based on revenue, in calendar year 2003 the Group was fifth in the world s advertising communications industry, and Dentsu (the parent company) was the largest single agency brand in the world. Its diversified client portfolio of over 6,000 advertisers includes leading domestic and international corporations. Many of its relationships with these clients are long-standing. In overseas markets, the Group maintains its own network and has formed a capital and strategic business alliance with Publicis Groupe S.A., which is ranked fourth in the world. In this way, the Dentsu Group is building a strong network covering Japan, North America, Europe and Asia. The Dentsu Group provides one-stop solutions, offering a combination of diversified capabilities and specialized services to meet clients communications needs. The Group delivers Total Communications Services, centering on mass media advertising for television, newspapers, magazines and radio, and provides creative, sales promotion and event marketing services, interactive communications, e-solutions, public relations, market research, direct marketing, brand consulting, and sports and entertainment marketing..... By working continuously to evolve and enhance its Total Communications Services in response to a rapidly changing operating environment, the Dentsu Group strives to be A Partner in Creating Value for clients, media-related companies and consumers. The Dentsu Group s Competitive Advantages Unparalleled Creative Capabilities One of the Dentsu Group s most significant competitive advantages is its creativity. The Group s creative staff of over 2,000 art directors, TVC writers (creators who specialize in TV commercials), copywriters, producers and other specialists work closely with other departments to provide a host of creative services, including creative development and production for mass media, corporate identity development and package design. In addition to mass media and other specialized services, Dentsu s integrated creative services also cover interactive media, including the Internet and mobile phones, and go far beyond the traditional framework of creative strategy. This high level of creativity has brought Dentsu repeated recognition in Japan and around the world. In The Gunn Report 2003 *, Dentsu was ranked seventh in the Most Awarded Agency category, which ranks all agency brands 13 Major Domestic Advertising Awards Total Number Number of Awards Share of Awards of Awards Won by Dentsu Won by Dentsu 2003 ACC CM Festival (November 2003) % The most prestigious advertising awards in Japan, founded in 1961, are presented by ACC (All Japan Radio & Television Commercial Confederation). Grand Prix Gold Award Silver Award Bronze Award In Top 10 tokyo.interactive.ad.awards.jp (May 2004) International Awards (July 2003 to June 2004) Gold Award Silver Award Bronze Award Finalist The One Show Clio Awards Cannes International Advertising Festival Asia Pacific Advertising Festival (AdFest) D&AD Awards 3

2 14 in the world according to the number of advertising awards won, and 10th in the Top Agency Network category. Dentsu has also received the Creator of the Year award 14 times in the 15 years since the awards were founded by the Japan Advertising Agencies Association (JAAA) in The Group is constantly working to reinforce its creative capabilities by providing aspiring creators with ample opportunities to realize their potential. * The Gunn Report, published in November each year, is an account of advertising industry performance based on the winners lists from the world s most important award competitions. Dentsu regularly ranks among the most awarded agencies, and, in the 2003 report, was second among single agency brands in the Most Awarded Agencies in the World category. Superior Planning and Analytical Expertise The Dentsu Group has extensive planning capabilities and well-integrated services, enabling it to offer the best solutions to client needs across a broad range of communications fields. Advertisers increasingly choose advertising agencies based in part on the quality of their brand consulting and strategic media planning capabilities. The Group has established a number of specialized divisions and departments well prepared to meet the sophisticated planning needs of clients, and is also developing original analytical tools and planning methods. Solutions are delivered by talented staff with impressive consulting and planning capabilities. Dentsu s Center for Consumer Studies is also active in the field of consumer insight, which forms the basis for planning. A Dominant Position in Media Services With a long history of operating as an intermediary between advertisers and media companies, the Dentsu Group has worked closely with all of Japan s major media organizations, developing solid relationships in the process. The Group s extensive experience has enabled it to cultivate outstanding media planning tools and methods. The Group also develops attractive and effective proposals for advertisers, while securing sought-after sports, entertainment and other... content for media companies. In these ways, the Group offers a broad range of services that bring value to both advertisers and media companies. The Group s ties to television broadcasters are particularly close, dating back to the birth of commercial television broadcasting when Dentsu provided newly established commercial broadcasters with personnel, financial and other forms of sales and program production support. The Group s connection with Japanese newspapers can be traced to the early 1900s, when it was part of the same group as a leading news service company. The Group continues to enhance these ties by providing consulting services related to the digitization of media. These relationships and experience give the Dentsu Group a competitive advantage in acquiring media time and/or space for advertisers. In particular, the Group boasts the largest share of TV spots and program sponsorships during the prime-time television viewing hours. Development of Business Opportunities through Content Marketing The Dentsu Group proactively creates new business opportunities by continuously investing in top-quality content rights, such as broadcasting and marketing rights for premier movies and sporting events. These investments, made possible by the Group s strong financial foundation, help make its content marketing activities more extensive than those of other global advertising groups. The Group s strong ties with media companies and major advertisers also enable it to market rights related to such major events as the Olympic Games and the FIFA World Cup. These activities diversify the Group s sources of revenue by generating income from such activities as the handling of broadcasting rights, licensing and sponsorship, as well as operating events in collaboration with hosting organizations. They also enable the Group to provide solutions that meet clients marketing needs and generate demand for the Group s core advertising services. Dentsu has acquired joint distribution rights for The Lord of the Rings trilogy in Japan New Line Productions, Inc New Line Home Entertainment, Inc. All Rights Reserved. The Lord of the Rings, the characters, names and places therein, TM The Saul Zaentz Company, d/b/a Tolkien Enterprises under license to New Line Productions, Inc. All Rights Reserved.

3 15

4 16

5 The Dentsu Group is the only advertising organization to actively engage in content marketing, believing that demand for high-quality content rights will grow as media digitization and multichannel diversification take hold. Using branded entertainment, product placement and other methods, the Group is also increasingly using content to enhance its branding services. The Group continues to strengthen its capabilities in this field, which it regards as an important new growth business for the future. Solid Financial Position Reflecting its strong financial foundation, Dentsu has the highest credit ratings that Standard & Poor s currently gives to any advertising company worldwide: AA- for its long-term debt and A-1+ for its short-term debt. Japanese rating agency Rating and Investment Information (R&I), has assigned a rating of AA to Dentsu s long-term debt and a rating of a-1+ to its short-term debt.... The Dentsu Group s Business Domains The Dentsu Group comprises companies and divisions with operations in five distinct business domains: total advertising services; marketing services; content business; e-solution services; and overseas operations. Marketing services and the content business are collectively known as specialized marketing services. At the same time, the Group continues to take decisive steps to expand its presence in the four key strategic markets described on pages 9 to 11. Led by Dentsu, the Group is also reinforcing overall Group capabilities by exploiting the internal synergies among these highly specialized companies and divisions to reinforce overall capabilities and create greater value for clients, mediarelated companies and consumers. Total Advertising Services In addition to the parent company, the Dentsu Group s advertising services are provided by Dentsu s regional Sports Rights Handled by Dentsu FIFA World Cup Germany Exclusive rights to sell official sponsorship to Japanese corporations; non-exclusive rights to sell such sponsorship to East Asian corporations, other than Japanese ( ) Broadcasting rights in Japan Sales rights of airtime packages in the United States ( ) UEFA Champions League Rights to sell official supplier packages to Japanese IT-related companies (three-year package, starting from the competition) IAAF World Athletics Series Exclusive worldwide marketing and broadcasting rights (excluding Europe and Africa) IAAF Golden League Exclusive worldwide broadcasting rights ( ) 2006 Asian Games (Doha) Exclusive worldwide marketing and broadcasting rights Major League Baseball Exclusive broadcasting rights in Japan ( ); rights to sell sponsorship and broadcasting rights for U.S. Japan All Star Series (scheduled for autumn 2004) Olympic Games Exclusive rights to sell International Olympic Committee (IOC) sponsorship to Japanese corporations Rights to sell Japan Olympic Committee sponsorship for the Olympic Games in Turin in 2006 (winter) and Beijing in 2008 (summer) East Asian Football Federation Rights to sell sponsorship and broadcasting rights for the Federation s regional football championships ( ) Asian Football Confederation Rights to sell sponsorship in Japan and broadcasting rights in Asia (through World Sports Group Holdings Ltd.) La Fédération Internationale Worldwide agency rights for major FINA events ( ) de Natation (FINA) Sports Rights Handled by ise 2006 FIFA World Cup Germany Exclusive on-site hospitality program operation and sales rights Opening ceremony for the 9th IAAF World Championships in Athletics PHOTO KISHIMOTO

6 Composition of the Dentsu Group and Four Markets Four Markets Domestic Advertising Market Media/Creative Advertising-Related Markets Marketing/Sales Promotion New Markets Content/Others Overseas Markets Total Advertising Services Dentsu Group Composition Advertising Services Group Overseas Group Specialized Marketing Services Marketing Services Group Content Business Group e-solution Services Group 18 subsidiaries and the Ad Dentsu network, which focus on serving local companies and regional subsidiaries of large Japanese corporations. Other Group companies involved in this area include Dentsu EYE, which specializes in female-oriented product marketing and advertising; Dentsu Young & Rubicam, which mainly targets international clients; and One Sky and other planning boutiques. Together, these companies are positioned as total advertising services entities providing branding and other advertising-related services. Media buying and media planning services are provided by cyber communications (cci) as an Internet media representative company, in addition to Dentsu and others in the Group. As part of a drive to enhance its specialized capabilities and sophisticated services, in the fiscal year ended March 31, 2004, Dentsu established three planning boutiques, BUILD creativehaus, bless you and SHINGATA, as well as The Goal, an advertising agency specializing in the fashion industry, and Internet advertising agency DENTSU e-link. Marketing Services The Dentsu Group has a number of companies providing an extensive array of advanced specialized services. By integrating such specialized offerings with its total advertising services, the Group is able to provide high-value-added one-stop solutions. Key Group companies in this field include DENTSU TEC, which undertakes comprehensive.... promotional services, including sales promotions, commercials and event marketing; Dentsu Research, a market research specialist; Dentsu Public Relations, a PR agency; and Wunderman Dentsu, a direct marketing company. Content Business The Dentsu Group has identified the content business as an important new market and is taking decisive steps to expand its business in this key area. Our principal Group sports marketing company is ise, a joint venture with Publicis Groupe. Principal Group entertainment companies include Geneon Entertainment and Geneon Entertainment (USA), video and music software planning, production and sales companies; Dentsu Casting and Entertainment, which provides talent casting services; Dentsu Music and Entertainment, which undertakes musical event production and tie-ups between commercials and televised musical programs; Creative Associates Ltd. (CAL), a television program production company; Music Gali, which is involved in the development and digital distribution of music; and Melodies & Memories Global, which operates a rights information management system for music and other content. e-solution Services Spurred by the digitization of media and the rapid growth of the Internet, customer relationship management (CRM), e-business consulting and other e-solution services have

7 developed into essential components of the Dentsu Group s Total Communications Services, and are playing a key role in the Group s efforts to reinforce its competitiveness. Group companies in this category, which centers on Information Services International-Dentsu (ISID), maximize their extensive expertise in IT solutions to support the efforts of advertisers with marketing systems engineering solutions. Overseas Operations The Dentsu Group provides Total Communications Services to clients around the world through its own global network, which, as of March 31, 2004, comprised 76 operating bases in 20 countries and territories. In Europe, the Dentsu Group is capitalizing on the extensive, well-established network of Publicis Groupe and the collaborative assistance it has gained through its alliance with that same company to strengthen its service structure and increase revenue. In the highly promising markets of... Asia, the Group s focus is on the expansion of its own network to extend its services not only to Japanese clients with overseas operations, but also to local clients. These two networks will continue to form the pillars of the Dentsu Group s efforts to expand its overseas operations. The Group has made particularly notable progress already in establishing a strong presence in China. In the fiscal year ended March 31, 2004, the Dentsu Group established several new companies in Asia with the aim of strengthening its overseas advertising services, content business and marketing service structures. These companies are advertising company Dentsu Plus and media agency Dentsu Media Palette (Thailand), in Thailand; research firm Sinomonitor International, in China; advertising companies Dentsu Communications (Bangalore) and Dentsu Marcom, in India; and the first company in our Asian creative planning boutique network, Clipper MotherAsia, in Hong Kong. 19 Dentsu s Billings by Business Category and by Industry (Nonconsolidated) (Fiscal Year Ended March 31, 2004) Dentsu s Billings by Business Category (As a Percentage of Total Billings) (%) Others* 16.9 Dentsu s Billings by Industry (As a Percentage of Total Billings) (%) Information/Communications 13.6 Others 22.8 Sales promotion 11.1 Radio 1.9 Magazines 5.4 Television 50.0 Transportation/ Leisure 4.1 Distribution/ Retailing 4.2 Pharmaceuticals/ Medical Supplies 4.7 Beverages/ Cigarettes 11.2 Cosmetics/ Toiletries 9.4 Foodstuffs 6.0 Automobiles/Related Products 9.0 Newspapers 14.7 Home Electric Appliances/AV Equipment 7.3 Finance/Insurance 7.8 * Others includes creative, new media, sports and entertainment marketing, brand consulting, public relations, market research, e-solutions and other services billings. * Dentsu frequently reviews the criteria for each industry category for the purposes of its own accounts. Accordingly, these categories may differ qualitatively from those used in Advertising Expenditures in Japan. In the fiscal year ended March 31, 2004, on a nonconsolidated basis, Dentsu reported an increase in billings. This primarily reflected higher billings for mass media advertising, that is, for the placement of television, newspaper, magazine and radio advertisements, from the Information/ Communications and other industries. The sales promotion and creative service areas were also brisk, boosting billings from non-mass media advertising compared with the previous fiscal year. Billings from mass media advertising services accounted for 72% of total billings. Billings from the Information/Communications industry rose 12.7%, while billings from the Cosmetics/Toiletries industry advanced 5.1%. Billings were also up from the Automobiles/Related Products and Home Electric Appliances/AV Equipment industries, rising 5.1% and 8.4%, respectively. Owing to a cooler than usual summer, however, billings from the Beverages/Cigarettes industry edged down 0.5%. Billings from the Finance/Insurance industry declined 9.6%, as an increase in bad loans and the introduction by the National Association of Commercial Broadcasters in Japan of new regulations discouraged advertising by consumer finance firms. The impact of severe acute respiratory syndrome (SARS) pushed billings from the Transportation/Leisure industry down 21.4%.

8 Business Dentsu Group at a Glance Total Advertising Services Advertising Media Buying/Planning Region Japan Client services Advertising planning, strategic proposals, etc. Creative development (television, newspapers, magazines, radio, billboards, etc.) Specialist advertising Dentsu (parent company) provides services to leading clients with their main offices in Tokyo, Osaka and Nagoya. Regional clients are served by Dentsu s regional subsidiaries and the Ad Dentsu network. Joint ventures set up by Dentsu and overseas advertising companies mainly serve international clients. This segment also includes planning boutiques that specialize in creative services. Media buying Media planning Dentsu provides comprehensive media buying and planning services. For more advanced media planning services, Dentsu Group companies use Dentsu s original media planning system DiaLog. In addition, cyber communications serves as a media representative for Internet advertising. Overview Main companies Dentsu Major regional subsidiaries Dentsu East Japan Dentsu West Japan Dentsu Kyushu Dentsu Hokkaido (2) Ad Dentsu Osaka Ad Dentsu (Nagoya) Ad Dentsu (Hokkaido) (2) Joint ventures with foreign-owned companies Dentsu Young & Rubicam beacon communications* Planning boutiques One Sky BUILD creativehaus bless you SHINGATA Specialized advertising Dentsu Sudler & Hennessey The Goal DENTSU e-link* Same as left (except planning boutiques) Internet advertising cyber communications* Japan Mobile Communications* Dentsu EYE Frontage* 20 Asia-Pacific Overview To secure and expand business with Japanese-owned and local clients in the rapidly growing Asia region, Dentsu has established two holding companies Dentsu China and Dentsu Asia. Acting primarily through these companies, the Group is setting up regional headquarters and otherwise reinforcing its business foundation. In major markets, the Group has almost completed establishment of multiple networks so it can serve competing clients in the same industries. The Group also uses the Asian networks of Publicis Groupe and Dentsu Young & Rubicam to provide a diverse array of services. Media Palette, Dentsu s own media agency brand, is building a network in Asia to provide media buying/planning services. Independent Media Palette companies handle this business in Taiwan and Thailand, while the media sections of subsidiaries in the Dentsu Group provide media services in other countries. In China, Beijing Dentsu Advertising s media department called Media Palette undertakes centralized media buying for its own operations. Main companies Dentsu China (3) (regional headquarters) Beijing Dentsu Advertising Dentsu Hong Kong (3) Phoenix Communications* (Republic of Korea) Dentsu Asia (regional headquarters) Dentsu (Taiwan) KuoHua (Taiwan) Dentsu Commex (Taiwan) Dentsu Vietnam Dentsu Holdings (Thailand) Dentsu (Thailand) Dentsu Singapore Dentsu (Malaysia) Dentsu Plus (Thailand) Dentsu Communications (Bangalore) Beijing Dentsu Advertising Media Palette (Taiwan) Dentsu Media Palette (Thailand) Americas Overview Through its own network, Dentsu mainly serves Japanese-affiliated clients. Going forward, Dentsu will also make use of the exceptional network resources of Publicis Groupe to enhance its services. In this region, Dentsu makes full use of the powerful media buying/planning capabilities of two Publicis Groupe companies Starcom MediaVest and Zenith Optimedia to provide clients with high-quality services. Main companies Dentsu Holdings USA DCA Advertising Colby & Partners Renegade Marketing Group DCC Communications (Canada) and the alliance with Publicis Groupe Europe Overview Through its own network, Dentsu mainly serves Japanese-affiliated clients. Going forward, Dentsu will also make use of the exceptional network resources of Publicis Groupe to enhance its services. In this region, Dentsu makes full use of the powerful media buying/planning capabilities of two Publicis Groupe companies Starcom MediaVest and Zenith Optimedia to provide clients with high-quality services. Main companies Dentsu Holdings Europe (U.K.) cdp-travissully (U.K.) Dentsu BLD Europe (Belgium) cayenne (Germany) indigo (Germany) cayenne (Italy) cayenne Wien (Austria) cayenne Communications (Netherlands) cayenne (Spain) Caetsu Publicidade* (Portugal) Dentsu Italia and the alliance with Publicis Groupe Notes: (1) Companies marked with an asterisk (*) are Dentsu affiliates in accordance with U.S. GAAP. With the exception of Publicis Groupe S.A., all others are subsidiaries. Other major subsidiaries not listed above include Dentsu Oceania; Dixos Market Intelligence; and Almeida, Vaquero Y Asociados. Other major affiliates include The Lord Group and Mediahead Communications. (2) Ad Dentsu (Hokkaido) was merged into Dentsu Hokkaido on April 1, 2004.

9 (As of March 31, 2004) Specialized Marketing Services Marketing Services Content Business e-solution Services Others Sales promotion Market research Public relations Event marketing Planning, production, investment and sales related to video (television programs, movies, etc.), audio and other content businesses Sports marketing Licensing Systems integration e-business consulting CRM Shared services (personnel dispatch, accounting, real estate management and others) Auditing Fund management Marketing services are provided mainly by Dentsu and the companies listed below. The Group will further reinforce its marketing capabilities, which are a crucial part of its Total Communications Services. The Dentsu Group is expanding its involvement in content marketing. Dentsu directly handles business related to video products and sports marketing. In addition, the companies listed below are developing their highly specialized content businesses in the areas of video, audio and other. This business centers on ISID. Dentsu will consider expanding this business in the future, including in cooperation with ISID. Shared services, primarily backoffice support services for Group companies, constitute the bulk of other businesses. The tenant business for Caretta Shiodome, auditing services, and fund management for venture firms are also included. DENTSU TEC PICT International Convention Management DIGITALEGG* Dentsu Research Soken Dentsu Public Relations Wunderman Dentsu Video Research* In-Store Communications* Geneon Entertainment Dentsu Casting and Entertainment Dentsu Music and Entertainment Music Gali Creative Associates Ltd.* Melodies & Memories Global DIGITAL PALETTE Mediarag* Information Services International-Dentsu Brainyworks ISID InterTechnologies SIID (4) Japan Business Create itid Consulting ISID Abeam (5) Kanematsu Electronics* Dentsu Facility Management Dentsu Human Resources Dentsu Management Services Dentsu Internal Audit Dentsu.Com ISID Horizon As it builds its operating network in Asia, Dentsu is establishing companies and taking other steps to expand its business. The Group is expanding its content business and its media business in the region. ISID provides services for clients in this region. 21 Pro Q (Thailand) Parabola Creative* (Taiwan) Leads (Thailand) ISI-Dentsu of Asia ISI-Dentsu Shanghai ISI-Dentsu Singapore ISI-Dentsu (Malaysia) In this region, the Group provides promotional services, PR, brand consulting and other advertisingrelated services. In addition to Dentsu Communications and Prophet Brand Strategy, these services are provided by Publicis Groupe companies. In this region, the Group handles business related to video products and sports marketing. ISID provides services for clients in this region. Dentsu Communications Prophet Brand Strategy* and the alliance with Publicis Groupe Geneon Entertainment (USA) Dentsu Sports Marketing USA Sports Culture Excellence Soccer United Media* ISI-Dentsu of America (6) Enterprise Financial Solutions* The three companies listed below provide belowthe-line marketing and PR services. The European market is also fully covered by Publicis Groupe companies. Production and sales of television programs are handled by DCTP. Dentsu is also reinforcing its sports marketing business through ise, a joint venture with Publicis Groupe. ISID provides services for clients in this region. Sharp Image (U.K.) Production Concepts (Belgium) BlueChip (Germany) and the alliance with Publicis Groupe DCTP* (Germany) ise* ise-hospitality* ISI-Dentsu of Europe (3) Dentsu Hong Kong was merged into Dentsu China on July 1, (4) Renamed ISID TechnoSolutions on May 17, 2004 (5) Renamed Dentsu e-marketing One on April 1, 2004 (6) ISI-Dentsu Holdings absorbed ISI-Dentsu of America and was renamed ISI-Dentsu of America on March 31, 2004.