Broadcasters force MPG to pay upfront for TV airtime deals

LONDON - The dispute between commercial TV broadcasters and media agencies has come to a head, with Media Planning Group electing to pre-pay for media rather than submit to demands to increase its levels of bank guarantees.

The disagreement originally surfaced in May when ITV Network Limited -- a consortium comprising Channel 4, Channel 5 and ITV -- demanded agencies increase their credit insurance to cover the cost of their clients' TV spend.

The broadcasters wanted each agency to have a debt-to-equity ratio of one to one, in order to reduce their exposure to debt in the event of an agency going bust. This disadvantaged some agencies and as the guarantees have come up for renewal agencies are seeking other ways of paying than renew the guarantees.

MPG has become the first agency to choose to pay for its media up front, but others are expected to follow as their bank guarantees expire.

MPG's managing director and IPA media policy group member, Marc Mendoza, said: "When our bank guarantee ran out we opted temporarily not to continue with what we and the IPA believe to be an unnecessarily restrictive practice." He stressed this did not leave the agency financially disadvantaged.

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