Kent & Spiegel Woes Lead to Layoffs at Williams
Most of the cuts were in Williams' back-office operations, while its media department remains intact, said an agency manager. The cuts mean that Williams now has 70 employees, down from a high of almost 100 last year, when it boasted that it was the largest infomercial media buyer in the United States.
"The layoffs are really just a reflection of the usual second-quarter blues, and we did get hit hard when one of our shows was yanked off the air," said Donna Rude, director of client services at Williams, Santa Monica, CA. "We decided to cut while we can and go from here."
Although Rude declined to specify the infomercial that was yanked, industry sources said it was for the Bun & Thigh Sculptor, an exercise device that is the subject of a legal battle with infomercial marketing giant Guthy-Renker Corp., Palm Desert, CA.
Rumors abound in the infomercial industry that Kent & Spiegel, Culver City, CA, is financially troubled, is seeking a merger partner, has laid off one-third of its staff and may even close its doors. A spokesperson denied the possibility that the agency would cease operations and issued a brief statement saying that the company would reveal its business strategy at an unspecified future date.
The spokesperson would not confirm whether the Bun & Thigh Sculptor infomercial was taken off the air, although industry insiders said the product was plagued with heavy returns because of a defect.
In its lawsuit against Kent & Spiegel, Guthy-Renker said the product defect required "a repair kit to operate properly." It also said the product that appears in the infomercial is "materially different" from the one the company ships. And Guthy-Renker said Kent & Spiegel was not shipping the product in a timely fashion, in accordance with Federal Trade Commission regulations.
If that allegation is founded, it would not be the first time that Kent & Spiegel had run afoul of federal regulations. The FTC signed a consent order with Kent & Spiegel in September after allegations that an infomercial for its Abflex exercise device made deceptive weight-loss, spot-reduction and calorie-burning claims.
The retrenchment at Kent & Spiegel is another indication of the volatility of the infomercial industry, where fortunes are made and lost overnight. The company enjoyed one of the bigger infomercial successes last year -- the Sobakawa Pillow, a buckwheat husk-filled pillow that was estimated to have posted annual sales of $70 million. Many other companies achieved similar extraordinary success, only to topple several years later. Regal Communications Inc., Quantum Inc., Synchronal Inc. and Inphomation Inc. went bankrupt. National Media Corp., HSN Direct Inc. and NordicTrack Inc. posted losses last year.
Last week's layoffs at Williams Worldwide follow a 10 percent cut in staff in August that was attributed to a slackening of billings growth as the infomercial industry stagnated during a year that did not match the media buying frenzy for abdominal exerciser infomercials.
The problem of stagnating billings remains persistent this year, Rude said.
"We were right on track for the first quarter, but the second quarter was a little less than what we expected," she said. "I know most other agencies are experiencing the same thing this quarter. We've got daylight savings on one weekend, Easter and Passover the next, and the following week, we've got taxes. Plus, good weather everywhere except here."