MEDIA FORUM: Would the end of commission help the industry? The agency commission system is back under the microscope. Few agencies earn their crust from the 15 per cent commission traditionally divvied up by media owners. Media specialists no longer see

Beware sellers posing as buyers. In the bad old days, that’s exactly the trick that media departments managed to pull. Because agencies were remunerated by media owner commission, they were rewarded financially for encouraging clients to spend more on media.

Beware sellers posing as buyers. In the bad old days, that’s

exactly the trick that media departments managed to pull. Because

agencies were remunerated by media owner commission, they were rewarded

financially for encouraging clients to spend more on media.



Go further back than that - if you go back far enough, bad old days

eventually become good old days - advertising agencies were the

advertising sales agents for newspapers. They found they could encourage

more business by helping prospective clients come up with a few ideas

and became sales teams with coloured pencils attached. And that, of

course, is where the whole commission system comes from - it’s the

vestige of an earlier way of doing business.



Not that buyers really rely on commission these days. What often happens

now is that the media owner gives the buyer its traditional 15 per cent,

the buyer passes it all on to the client, which gives back a figure

equivalent to 2 or 3 per cent - except that the client and the buyer now

agree to call this payment ’fees’.



Confused? You will be - and it can get more complicated, with some

clients offering a mixture of old-fashioned buying commission and

project-specific fees negotiated against a number of criteria. Often it

comes down to crude calculations involving staff time-sheets and hourly

rates.



So why do we bother at all with commission? This issue resurfaced

recently after a media summit meeting - and it’s not likely to go away.

This is sensitive territory, fundamental to the way the industry does

business. Business terms are meant to be intensely private - client

confidentiality is, after all, sacrosanct.



The question threatens to drag with it a whole load of related and

embarrassing issues. Like the extent to which sur-commission - extra

commission paid only to buyers - now exists within the industry.



Also, for the past few years there have been dark rumours about

innovative and creative ways of ’incentivising’ agencies that are

illegitimate cousins of the commission system. No-one would use the word

’backhander’, but some agencies are believed to have ’consultancy’

relationships with media owners.



The commission system is an awkward topic - media specialists are

selling themselves on the value-added services they can offer and want

to be treated like management consultancies. Surely an end to the

commission system would help to create a better image for the

industry?



One company squarely in the consultancy mould is Unity, a media planning

specialist that can’t earn commission - equivalent, virtual or otherwise

- because it never buys media. Obviously, it would be keen to see the

back of an outdated system. Andy Tilley, Unity’s managing partner, says:

’We believe it’s a nonsense to seek to pigeon-hole media because the

whole media landscape is changing enormously. In our experience, clients

are more willing to pay for additional thinking over and above plans for

slots and spots. With our clients, we are treated as a salaried member

of staff and are paid for the contribution we make to the business. I

don’t see any reason why the commission system should stay. The only

thing we need to ensure is that an appropriate amount of money stays in

the system.’



Of course, some might argue it’s easy for Tilley to say that - it costs

him nothing. Are there likely to be problems for the large buyers? No,

not in theory, says Alan Brydon, the managing director of CIA

Medianetwork.



He adds: ’Agencies and clients don’t think directly in terms of

commission any more. So, in theory, if media owners dropped all their

prices by 15 per cent and the system disappeared, that would be fine. In

practice, I can’t help feeling that it would create huge problems to

implement - a bit like decimalisation in the 70s. And I’d be surprised

if there was a great call for this - it’s not as if there’s anything

hidden here. The sums aren’t that difficult.’



Do media owners agree? After all, it’s their system. Do they still

regard commission as an incentive to buy? Len Sanderson, the deputy

managing director of the Telegraph group, says not. ’Intrinsically, I

see no problem with commission going. Remuneration is between client and

buyer. But I do think there are problems that need thinking through.

Logically, prices might have to come down by 15 per cent - but against

what base? An advertiser might run three campaigns in one year, all at

different prices. There would be problems agreeing what we calculate

against.’



Tony Wheble, the sales director of Flextech Television, who was

broadcast director of Abbott Mead Vickers BBDO in a previous

incarnation, says the existing system is transparent - he dismisses

worries some have about its potential abuses. ’Most media operations

have moved over to fee-based systems. I suppose the only problem with

fees calculated against spend is that media specialists might find it

difficult in years when a client doesn’t spend very much. But, in

general, I think the system works.’



However, Wheble concedes that the commission system serves no formal

purpose. As all media offer the same level of commission - except for

outdoor - it doesn’t affect buying decisions. In any case, with 80 per

cent of expenditure policed by auditors, all buying is guaranteed to be

appropriate to the client’s marketing plans.



Some, though, believe that the evolving structures of the market will

add weight to their arguments. New opportunities such as sponsorship or

the use of Websites can’t be accommodated within a commission model.

Unity’s Tilley can appreciate why there will be great resistance to any

fundamental review of industry practices, but he believes it is

unavoidable. ’This issue will gain greater importance, especially when

the market involves things that are not straightforward media buys.

Nowadays there are so many bits to the media mix - TV is not selling

just airtime. How does that fit with the commission system? The system

is anachronistic and change is inevitable. I believe it is better to

embrace the future rather than try to reject it,’ he says.



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