The narrative is these businesses have been left in a tail spin by the growth of digital and they now resemble forlorn dinosaurs struggling to adapt to the brave new world.
The argument goes that City agencies, puffed up on vast profits during the pre-crash salad days, are still modelled to rely on project revenues from M&A and new listings – both of which have shrunk spectacularly.
Meanwhile, the hefty and reliable retainer fees for financial PR – typically £200k a year and more for a big FTSE client – have shrunk drastically as in-house teams have upskilled and require more selective and strategic services.
Some of the industry’s biggest players are certainly finding life hard. Tulchan Communications and Citigate recently reported double-digit revenue declines. And even City PR doyen Roland Rudd saw his pay drop amid a flat year for RLM Finsbury.
But are we to believe that Finsbury’s business model is broken because Rudd only received £2.7m last year – or indeed that Tulchan founder Andrew Grant’s £900k pay drop to £700k shows terminal decline?
Yes, City PR is not as profitable as it once was. But the returns are still there for successful agencies, which explains why private equity continues to sniff around the industry.
The debt-fuelled M&A bonanza of the past may be over, but gravity dictates major transactions will come back. And they will remain hugely profitable.
But most importantly, the UK’s major City PR players have already responded to client needs. They have already broadened and deepened their offering and they have invested in international growth to dominate the global market.
Clients clearly think they now know a thing or two about crisis and reputation management too. It was to RLM Finsbury that Starbucks turned during its tax rows and Brunswick that a Savile-besieged BBC briefly called in.
Ultimately agencies of all shapes, sizes and sectors are faced with a clear choice – internationalise or specialise. Bigger clients increasingly want joined-up comms programmes that transcend international boundaries or sector specialisms.
There is a living to be made in boutique consultancies offering specialist skills, just as pan-global agencies will continue to benefit from opportunities afforded by the growing importance of reputation in the boardroom.
Not for the first time, it is those agencies caught in the middle that face the starkest choices.