Last week, senior figures within ITV revealed that they had started a
root and branch review of the way airtime is traded. Is there a genuine
desire to move away from the discredited station average price system?
Even if there is, will it be possible to find industry consensus on how
to move forward? Alasdair Reid reports
‘It’s at times like this,’ a senior airtime buyer commented last week,
‘that I remember that thing from the Bible: ‘Let he who is without sin
cast the first stone.’’
Strange days indeed - it’s pretty worrying when airtime buyers start
spouting scripture. But this isn’t millennial madness. The buyer in
question - he doesn’t want to be identified - is referring to the latest
episode in the television trading crisis and a theory that has been
gaining credence over the past week.
This theory holds that Laser will prove unwilling to sue the CIA Group -
for alleged breaches of share deal agreements - because sales houses may
have too many skeletons in their own cupboards. In any case, if things
go to court, the danger is that the Office of Fair Trading will take an
interest and begin asking all sorts of awkward questions regarding
conditional selling and agency share deal agreements - common practices
that can clearly be seen as illegal under OFT rules.
If the OFT gets involved, it doesn’t take too great a stretch of the
imagination to envisage eventual calls for the introduction of a UK
version of Le Loi Sapin, the law that seeks to guarantee transparency of
trading in French media markets. But no-one wants that now, do they?
So, ITV has been making noises about changing the whole trading system.
A few weeks back, the sales houses agreed that it was time to put more
emphasis on incentivising individual clients - as opposed to agencies -
thus diminishing the importance of the share deals that bedevil the
current system. Now the network is considering taking the ultimate step
- ending the station average price trading benchmark system.
Exploratory talks have taken place within the network, and wider
discussions are likely to follow. Is this a genuine initiative? Can the
system really be changed - and if so, how quickly?
Jerry Hill, the chief executive of TSMS, argues that change is
inevitable. As ITV’s dominance of audience share declines - and
advertisers gain greater freedom of choice - ITV will have to respond.
He believes a new system could resemble the current situation in the US
where 80 per cent of airtime is sold upfront, on a fixed-price basis,
and against certain audience guarantees.
But he insists that his prime concern is to ensure that this happens in
an ordered fashion. ‘My worry is that if there isn’t a consensus, or if
the evolution happens too quickly, the process will be very painful,’ he
reveals. ‘We recognise that the market is changing and that we need
something relevant to the new conditions - but there is no benefit to
anyone if the three sales houses are out of step on this.’
Bob Wootton, the director of media services at the Incorporated Society
of British Advertisers, echoes much of that. ‘We’re encouraging everyone
to look very seriously at this issue - and I don’t think advertisers are
scared of change. Remember, they are used to dealing with concepts of
absolute value in other areas of their businesses. They don’t
necessarily see station average price as a crutch they have to lean on,’
he points out.
‘But what we definitely don’t want to see is a new system that benefits
20 or so advertisers and increases the costs of the rest. Nor do we want
the current system dismantled without something concrete put in its
place. It has to be done with joint industry agreement and that will be
hard but not impossible to achieve. We would argue that it would be
easier to achieve against a background of rising supply at ITV - meaning
an increase in advertising minutage and an undertaking from ITV about
the network’s audience performance.’
But even within ITV, consensus seems a long way off.
Although senior Carlton Communications executives attended recent
meetings, airtime sales people were not involved. Sources say that
internal debate on this issue has been heated. Steve Platt, the sales
director of Carlton UK Sales, says that he is very happy with the way
things are at present. ‘We have a reputation of being tough, but fair.
We deliver our deals and we expect our clients to do the same,’ he says.
‘In terms of trading currency, the majority of clients still want to
trade against station average price. We are very happy to trade in any
way that they want to trade. As ITV faces increased competition, it may
be in the best long-term interest to move away from station average
price, but only if a more acceptable alternative can be agreed. Clients
must start to move away from discount-led negotiations and accept that
the ITV product is undervalued. Once the full value of our programmes is
recognised, the debate will move forward.’
There is also a wide range of opinion on the buying side. Nick
Theakstone, the television buying director at the Media Centre, takes a
‘if it ain’t broke don’t fix it’ line. ‘The current system provides a
method of trading that gives an insurance policy to agencies, clients
and media owners. So why does ITV want to change the system? Is it just
a clever ploy to put the price up or is it a way of hiding the fact that
it is an expensive supplier?’ he asks.
David Connolly, the joint media director of Leo Burnett, disagrees.
‘There are fundamental flaws with the current ITV system. The worse
their product gets, the more advertisers are asked to pay, and the
system can reward an advertiser spending pounds 1 million and an
advertiser spending pounds 20 million in equal measure,’ he argues.
Connolly believes that moving away from station average price will not
really suit contractors because at some stage, they will have to start
turning away revenue in order to deliver fixed prices. Equally, many
agencies will fear losing the crutch of station average price. ‘But
change is necessary for advertisers to benefit,’ he concludes. ‘They
keep the ITV companies and agencies in business and deserve a fairer