The stand-off between Channel 5 and Carat is almost business as
usual for this time of year. Somewhere in the murky world of TV trading,
there always seems to be a broadcaster and an agency unable to agree
Generally, as is the case here, the broadcaster wants a larger share of
the agency’s spend, while the agency wants a greater discount.
In this case, Channel 5, which attracts just under 9 per cent of
commercial viewing, wants a share of adspend as close to 9 per cent as
However, on average, it gets about 6 per cent from agencies.
To put a 9 per cent share Channel 5’s way, Carat might want a discount
against ITV station average price in advance of the 35-odd per cent most
agencies are getting.
This much is normal. What is more unusual is that the dispute should
have resulted in the agency boycotting the channel. Normally, goodwill
allows the continuation of last year’s deal, with the prospect of a
With Channel 5 and Carat, either all goodwill has been exhausted, or
they are so far apart that they can’t see a solution. Or both.
So what is going on? On the face of it, this is a disagreement over the
value of Channel 5’s airtime. Mark Craze, chief executive of Carat,
could argue that in a market which increasingly values the delivery of
light viewers, Channel 5, for which this is not a strength, should be
even cheaper that it is.
On the other side, Channel 5’s sales director Nick Milligan, who is
flying high with annual revenues of pounds 184 million, might be seeking
to reduce the airtime cost differential between Channel 5 and ITV.
But sources - who all refused to be quoted on the issue - say there
could be another explanation.
Carat was selected to drive Channel 5’s advertising from its launch in
April 1997 until May 1998. It is possible that the two sides have only
recently begun negotiations based on market rates, having previously run
a sweetheart deal based on Channel 5’s client status. Could fall-out
from the end of the relationship be souring negotiations?
If this is the case, as it appears it may be, who will blink first?
The channel probably takes around pounds 1 million a month from Carat
and, while airtime will be filled, it may have to offer bigger
discounts. It also plans to swap airtime for equity in dotcoms (Media
Business, last week), which might also soak up some supply.
For the agency, the problem is finding another source of cheap
Assuming the same level of spend on Channel 5 as last year, Carat might
have to pay around pounds 300,000 more a month to use ITV. But with
luck, the agency might pick up the impacts with a combination of Channel
4 and satellite for the same price. This would enable it to live without
fear of the media auditor.
Alternatively, they might decide to go back to a more peaceful form of
business as usual.