By ALASDAIR REID, campaignlive.co.uk, Friday, 23 February 1996 12:00AM
Last week, ITV came up with proposals to make airtime trading more
transparent and put an end to various abuses of the trading system. Both
sides have been at fault in the past, but agencies have been the most
recent offenders. Is it time they were forced to clean up their acts?
Alasdair Reid asks the media buyers and sellers
Media buyers can hardly say they haven’t been warned. On at least two
occasions since the notorious 1993 Yorkshire overtrading fiasco, the
television airtime market has threatened to go into meltdown again. On
both occasions, the crisis was due to blatant agency overdealing and the
resulting ITV threats that it might be forced to take action and sue the
offenders. It didn’t come to that on either occasion and many observers
reckoned that the agencies involved were lucky to escape the disastrous
headlines that would have resulted.
But ITV has now decided that enough is enough and is promising that it
will act tough. Last week its auditor, Rickards, wrote to the finance
directors of television buying agencies, requesting - perhaps
‘demanding’ would be closer to the mark - free access to all trading
accounts on a month-by-month basis.
Most airtime deals involve agreements on the share of billings that the
media buying company is prepared to commit to a particular sales point.
The greater the share, the bigger the discount. The temptation, for some
agencies, is to offer apparently large shares to all of the sales house.
The agency’s total commitment to the market as a whole will be more than
100 per cent, but how will the sales houses ever know? After all, they
are fierce competitors and don’t spend a lot of time talking to each
other about their deals.
This new system of auditing will be watertight, and it will also make
agency finance directors responsible for making sure that deals are met.
All of which is fair enough, surely? Well, not entirely, media buyers
Bill Barker, the broadcast director of J. Walter Thompson, is not
entirely happy with the ITV initiative. ‘Our basic position is that this
agency has nothing to hide when it comes to enhancements to the auditing
procedure,’ he asserts. ‘But this shouldn’t turn into a fishing
expedition for ITV, with the sales points trawling for all the
information they can get hold of to help them in future airtime
negotiations. The auditor should be able to assess an agency’s
performance on deals and give it a pass or a fail - no numbers should be
involved at that stage. If it fails, the auditors should be able to come
back and go through the numbers so that the sales point can see what it
is owed. There is no justification for seeking monthly information when
a deal is done on an annual basis. ITV is after far more information
than is strictly necessary for transparency purposes, and we have a
problem with that.
‘It is also our view that trading transparency would be further enhanced
by allowing our clients to audit ITV’s books in greater detail.
Basically, if we are talking transparency, there is a lot it can be
doing too. There must be clear terms of reference on both sides.’
John Blakemore, the UK advertising director of SmithKline Beecham and
the chairman of the Broadcast Action Group of the Incorporated Society
of British Advertisers, says that he welcomes the initiative - in
principle. ‘Anything that ensures that the terms of deals are met gets
my approval,’ he states.
‘But I’m not sure this is the right way to go about it. It seems heavy-
handed to say the least. Some of the information ITV is asking for does
not concern share deals and is therefore none of its business.
‘I have written to our buying agencies telling them not to release any
information other than what is necessary to assure them that we have met
the terms of our agreements. I don’t know if this is going to be an ISBA
issue because we haven’t had time to have a meeting. All I can say is
that it might have made more sense for ITV to talk to us first.’
Mick Desmond, the chief executive of Laser Sales, says that the issue is
about good business practice as well as trading transparency. The
business community as a whole has been seeking to ensure that the front
of house - traders and negotiators - are singing from the same hymn
sheet as the back of house - finance controllers and directors.
‘As far as the auditing process is concerned, nothing has been
formalised yet and I can only talk on behalf of Laser,’ Desmond says.
‘As a company, we now have the necessary structures in place to
reconcile deals, which are signed off by both front and back of house.
We trade in an open fashion and in that respect we are in line with most
major companies these days. In order to fulfil station average price
agreements we publish our revenue figures and validate those figures by
producing Independent Television Commission certificates.
‘We are looking for the same open practice from agencies. Some agencies
have gone through these processes - but it is not something that any of
them should be afraid of, especially if they have nothing to hide.
Unfortunately, in the past, there have been examples on both sides where
the dealing process has been abused. What we are keen to see is the
introduction of the best possible trading practices for the industry.’
Tony Kenyon, the managing partner of IDK Media, agrees that ITV’s
motives are more impressive than the methods it intends to use. ‘ITV has
to weed out those agencies that are defaulting on deals,’ he says. ‘Most
people will agree with that. And I suppose you can understand ITV’s
reasoning - let’s talk directly to finance directors because they are
less likely to tell porkies. But it should stick to asking for
information relating to the deals that have been agreed. It wants more.
‘I’m afraid this would appear to be classic ITV arrogance. This should
have been brought up as part of annual negotiations in the autumn rather
than halfway through the year. We will politely decline this request,
while making it clear that we are in favour of doing what is helpful in
weeding out offenders in the airtime market. If, in the future, we do
come to an agreement about sending information relevant to share deals,
it will have to be done at a frequency that doesn’t put an intolerable
burden on the agency.’
This article was first published on campaignlive.co.uk