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
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
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
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
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
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.