OPINION: Airtime trading market will benefit from radical reform

Formal and transparent volume discounts will start to make ITV more accountable to advertisers and help shape a reward-based market, Jerry Buhlmann claims

Formal and transparent volume discounts will start to make ITV more

accountable to advertisers and help shape a reward-based market, Jerry

Buhlmann claims



Mandy Pooler raised a number of important issues in her opinion piece

(Campaign, 15 November). But it might be useful to go further and look

at how we might change the whole system of TV trading. The structure of

trading in the UK market, specifically regarding ITV, has been a

simmering issue for a number of years. It was highlighted first by

Yorkshire Television overdealing and recently by CIA overtrading.



The motivation appears to have been to find a short cut to more revenue

or greater discount. The only real surprise in a market swarming with

media and financial auditors is how anyone imagined these actions would

not come to light.



Recent events have provoked much discontent among advertisers who have

to make financial guarantees in return for unspecified price increases.



Changing the system will not be easy. The removal of station average

price is often held up as the route to a better way of trading. But you

can already have a perfectly amicable negotiation without linking

yourself, or the TV contractor, to station price. The reality, however,

is that when both parties get back to the office, the first thing they

do is see how the deal stacks up against the market.



Nobody can ‘uninvent’ station price. When ITV starts taking less than 50

per cent of commercial TV advertising revenue, station price will simply

die of old age, but it will not disappear before then.



In reality, overtrading and overdealing are the dodgy end of a complex

system, which involves advertisers trying to squeeze every point of

discount out of the airtime inventory, while TV contractors aim to

maximise the yield per 30 seconds. The whole premise of the system is

that the volume of revenue is a given and here is the key to changing

the system. Currently ITV sales houses fight among themselves for share

of revenue. There needs to be a more tangible link between advertiser

value and airtime delivery.



I would like to see formal, transparent volume discounts for

advertisers, based on spend thresholds linked to investment. This would

build in reward and additional value to the advertisers who deserve it

most. These volume discounts would be rebatable sums that could be paid

directly to advertisers. These discounts should be increased if

audiences fall below a respectable delivery band. This increased rebate

would help mitigate cost inflation and would focus ITV on taking

audience from the BBC instead of maximising revenue share.



This change would make ITV more accountable to advertisers by linking

its performance more closely to its audience delivery. For example, if

an advertiser spent pounds 10 million, it would receive a rebate of 5

per cent. If audiences have fallen by more than, say, 5 per cent at the

end of the year, the advertiser would receive an additional 2.5 per cent

rebate.



This scheme could be operated by sales houses, individual TV groups or

by ITV as a whole. It would deliver a fairer, more transparent system.

It would also be a forerunner to a truly multi-channel commercial TV

environment where advertiser volume discounts, price negotiations versus

previous year and fixed-rate deals would all be commonplace.



In the medium term, Barb, the current industry audience measurement

system tool, will become redundant and the measure of value will be

based much more on qualitative values and advertising effectiveness.

This will produce a market where those agencies and advertisers with the

best-quality knowledge and research will have a clear advantage and will

be more likely to trade on a rate-per-minute basis.



In this market, vision, better consumer understanding and quality

planning will be the critical performance criteria.



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