MEDIA PERSPECTIVE: How the OFT probe into TV ad trading could affect us all

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.

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

control.



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

clients.



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.



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