Why advertisers can profit from station average price - It may be the latest bete noir of the industry, but SAP could help advertisers in the battle against inflation. The negotiation of fixed rates is key, Mike Wood believes
By MIKE WOOD, the media director of J. Wal, campaignlive.co.uk, Friday, 28 March 1997 12:00AM
It may be an ’odd way to buy and sell advertising’, Paul Polman, the managing director of Procter and Gamble, remarked (Campaign, 14 March), but station average price trading has dominated the buying and selling of airtime for almost 20 years.
It may be an ’odd way to buy and sell advertising’, Paul Polman,
the managing director of Procter and Gamble, remarked (Campaign, 14
March), but station average price trading has dominated the buying and
selling of airtime for almost 20 years.
Will it survive? Not if some advertisers have their way.
At the recent Monte Carlo TV conference, Tim Pile, of the Alliance and
Leicester building society, called SAP a ’con’, while P&G’s media
manager accused it of fuelling inflation.
P&G may be leading the charge, but it isn’t alone. A decisive 72 per
cent of the conference voted to end SAP altogether.
So why does SAP matter and why has it crawled out of the media
The curiosity of SAP lies in the fact that that there are no fixed
Prices are contracted at a fixed percentage above or below the average
cost of ITV airtime and the actual price will rise or fall with market
The implications take some thinking about. SAP allows advertisers to
sidestep the risk of negotiating a fixed price in an uncertain
For ITV companies, it means never having to say sorry. If ratings fall,
the price adjusts to balance the books.
Of course, prices also go down. But in recent years, the trend has been
one of rising costs, hence the concern. And the self-adjusting price
means the books are always open for business. This allows advertisers
the flexibility to buy short term.
So why, if SAP is so wonderful, are some TV companies keen to drop
TV companies are split on the issue. Generally, the smaller stations are
in favour of SAP because it provides a trading currency which has a
built-in inflation factor. ITV companies are less keen, arguing that
station average price treats all programmes as equal and does not
reflect the fact that peak programming is of greater value to
There is some truth in this, although a rise in the cost of peak
programming is likely to be offset by lower daytime costs.
Some advertisers are keen to stamp out SAP because they believe it takes
pressure away from ITV companies to increase audience levels. They do
have a point, but only in the short term.
In the longer term, money follows audience and burgeoning competition
between channels will be a powerful incentive to increase viewing
Clients benefit from the monthly information on ITV revenues, a
significant negotiating advantage which diminishes ITV’s ability to
price its product according to what each customer will bear.
A widely held view is that the smaller clients will benefit most from
the equalising effect of freely available price information. That’s
However, what’s less certain is whether ending SAP would benefit large
But advertiser size is only one factor. Gains will be made by those who
negotiate well and exercise options to switch investment if the price
gets too high.
Advertisers who want to fight inflation should not wait for the death of
station average price. They can grab hold of the future by negotiating
But nothing comes free. If ITV companies are to guarantee audiences,
then they may demand quid pro quo in guaranteed budgets. That would mean
a serious loss of flexibility for advertisers, the majority of whom
contract to a share of ITV advertising spend rather than an expenditure
Inflation is a burning issue - and rightly so - but growing competition
and the possible increase in minutage will help ease cost pressures.
Flawed as it is, advertisers have more to lose than to gain from the
destruction of our TV trading system.
This article was first published on campaignlive.co.uk
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