By now it can’t have escaped your notice that the Office of Fair
Trading is having a poke around in the muck of the TV trading arena -
not the sort of thing you do for kicks.
The OFT clearly has something in mind when it takes the trouble to ask
industry leaders about ITV’s airtime deals, the station average price
mechanism and the whole trading system - although quite where the
questions are leading is still unclear.
But it’s been fascinating seeing people wriggling over this one. First,
the Institute of Practitioners in Advertising receives a letter from the
OFT asking some pretty probing questions about the share of broadcast
deals ITV sales houses were proposing at the end of last year.
The original OFT letter queried whether a single ITV sales house could
push for a share of an advertiser’s total TV spend. The consensus is
yes, because this would not extend the sales house’s influence beyond
the 25 per cent of total TV spend which a sales house is allowed to
So, the IPA says, issue resolved.
Well, not quite. Because what the IPA is keen to keep under wraps is the
extent of the OFT probe. When OFT questions stray into areas such as
’How are negotiations with advertisers about prices and discounts
conducted to set prices?’ and ’Is advertising on Channel 4, Channel 5,
satellite and cable TV a good substitute for advertising on ITV?’, the
finger begins to curl in the direction of agencies.
Conspiracy theorists say the OFT’s questions are pointed enough to
suggest information is being filtered through by major advertisers. The
theory goes that big advertisers are getting so fed up with TV
inflation, particularly on ITV, they are preparing to take a good kick
at station average price - and agency deals.
Agency deals are those spectral arrangements which nobody admits to but
which form a fundamental part of many agencies’ dealing position.
Negotiations with a TV sales house, for example, are conducted not on
the basis of an individual client’s TV requirements, but on all the TV
spend an agency has to play with. The sums committed - and discounts
received - are higher, so smaller advertisers end up with a better deal
than they would negotiating with their own piddling spend.
The big advertisers fear agency deals are subsidising the smaller
But remove agency deals and the fundamental economics of many agencies’
trading collapses. A peek at shops that eschew agency deals also
suggests honesty is not necessarily the best policy.
All of which means that if the OFT gets its sticky fingers in the agency
deal pot, advertisers, agencies and media owners could all be the worse
for it. No surprise, then, that the OFT probe is being played down. It
wouldn’t be the first time the OFT squealed over agency deals - Thames
Television came unstuck in 1984 over such trading. Now the issue of TV
inflation may prove the catalyst that blows apart the entire market.