MEDIA: Should the TV trading mechanism be replaced? What price station average price? The mechanics of the airtime trading system are back on the agenda again - and this time it could be serious. Not only are some major advertisers questioning its usefuln

A couple of weeks back, Michael Hebel, head of advertising for Unilever, denounced the way TV airtime in the UK is traded against a benchmark called station average price. But then station average price is like the weather - you might grumble about it, but it’s always there. Except, of course, for the fact that people tend to listen to Unilever heads of advertising.

A couple of weeks back, Michael Hebel, head of advertising for

Unilever, denounced the way TV airtime in the UK is traded against a

benchmark called station average price. But then station average price

is like the weather - you might grumble about it, but it’s always there.

Except, of course, for the fact that people tend to listen to Unilever

heads of advertising.



And except for the fact that this was no run of the mill moan. Usually

station average price comes under fire when there’s a crisis - when a

deal between buyer and seller reaches breaking point. Hebel’s point is

not that the wheels sometimes come off, but that the system is

fundamentally wrong. It inevitably produces airtime inflation.



The Incorporated Society of British Advertisers and the Office of Fair

Trading were obviously listening. Last week, ISBA announced that it is

to hold a seminar on station average price, probably in the next couple

of months. And the OFT, which recently began looking into the way that

ITV constructs some of its deals, is asking some fundamental questions

about station average price.



This is serious stuff. The issue is now firmly on the agenda. Station

average price trading is basically a floating price system. The more

money there is coming into the market, the higher station average price

becomes. But the biggest advertisers are always guaranteed to get the

best prices, whatever the state of the market. It takes an element of

risk out of the system - when prices move upwards, you can take some

consolation from the fact that everyone is suffering.



And that, according to Hebel, is also its main fault. It masks the fact

that absolute prices have been continuing to rise. The main alternative

- straightforward fixed price purchasing - lays bare the horrors of

inflation.



But it is also a huge futures gamble. If you buy long and pay big bucks

only to see the market starting to collapse, you look silly.



Sales points, including ITV’s, tend to say that they are more than

willing to please. They’ll trade in just about any way that people want.

But when advertisers are asked to put up or shut up, they tend to stick

with what they know. And if you want any proof of that, they say, look

no further than the salutary lesson of the MAS debacle. MAS, then

Yorkshire’s sales house, tried to introduce fixed price trading in 1991.

It was a disaster.



Tess Alps, the chairman of Drum PHD, was at MAS back then. She says she

was surprised at the way their ’hands were bitten’ by clients. ’They

seemed to be saying there was nothing in it for them. And agencies

certainly don’t like to rock the boat. Fixed prices might offer you a

way of controlling inflation but prices can go up as well as down.



’Station average price is simpler to operate than fixed rate. And the

truth is that there is nothing in fixed price trading for media owners,

especially those who sell at a premium - like ITV. Even Channel 4, which

introduced fixed pricing when it started selling its own airtime, has

retreated from that as it has become more expensive. ITV will never

willingly do it. Nor should it. There are too many inbuilt mechanisms

operating across the industry that would have to go or be redesigned.

The drive would have to come from clients. I doubt it’s going to

happen.’



So what’s the fuss about, if no-one really stands to gain? The rumours

are that some of the biggest advertisers have realised that they are the

market. They have a better idea than anyone which way the market is

likely to go - when they’re spending, the market goes up; when they

don’t, it goes down. Simple as that. So they face relatively little risk

in opting for fixed prices. In short, it could increase the competitive

advantage of the larger players - and that’s something they feel they’re

entitled to. Unilever, for instance, is already believed to have a large

fixed price component on the deals it has for many of its brands.



That’s not exactly how Bob Wootton, ISBA’s director of media and

advertising affairs, sees things. He takes issue with the theory that

advertisers were responsible for roasting MAS. ’Advertisers have always

put their media suppliers under pressure to deliver and agencies respond

in all sorts of ways - and picking on the supposedly weakest is perhaps

one of them. But the MAS situation was not directly advertiser-driven

nor should you infer from what happened that advertisers are by nature

resistant to change.’



But he also doubts whether size is a determining factor here. ’That’s

one of the things we hope our forum will reveal,’ he adds. ’It is by no

means clear that this is an entirely volume-driven market.’



Many in the industry are sceptical about whether there is any need to

change the system. John Billett, the chief ex-ecutive of the Billett

Consultancy, says it’s important to separate the issues of price and

value. ’These days, station average price never features in any of the

evaluations we do for clients. Our measure is cost per thousand modified

by a number of quality criteria - coverage, speed-of-coverage build,

programme environment, centre versus end breaks, position in break and

efficiency of targeting.



’What we are saying is that the petrol price per gallon is no measure of

the petrol consumption performance of your engine, nor indeed of the

quality of your journey. There will always be a need for a trading

mechanism like station average price and, once you’ve invented one, it’s

almost impossible to ’uninvent’ it. Even with fixed prices, everyone

would just calculate backwards to station average.’



Paul Taylor, the managing director of BMP Optimum, tends to agree. And

he rejects the idea that there might be inertia because of

infrastructure issues. ’When Channel 4 began trading on fixed prices in

1993, it didn’t prove a problem to anyone. It’s fashionable to point to

station average price as a major catalyst in inflation. But the reality

is that most advertisers are evaluating the actual prices they’re paying

and not the discounts they’ve been getting via their agencies. And

station average price has many benefits. The main thing is that it

allows terrific flexibility for advertisers - and many of them actually

like that.’



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Digital marketing executives oversee the online marketing strategy for their organisation. They plan and execute digital (including email) marketing campaigns and design, maintain and supply content for the organisation's website(s).