Airtime deal negotiations by the Telewest-owned sales division IDS have been hit by the internal investigation into alleged commission payments to agencies.
IDS represents the UKTV suite of channels, as well as Bravo, Living TV and Trouble. At the end of last year, the Nasdaq-listed Telewest announced that it was reviewing "certain business practices" - understood to refer to £5 million of extra commissions paid by IDS to agencies on top of the 15 per cent industry standard for spending clients' money on its channels.
The investigation couldn't have come at a worse time for IDS, led by its managing director, Mark Howe. After a strong 2004, which saw its impacts increase, partly as a result of an increase in commercial minutage and the launch of plus-one channels, it was expecting an increase in its share of ad budgets in deal negotiations.
However, agencies are now rolling over the terms of their 2004 deals until Telewest completes the investigation, allowing the other commercial broadcasters to benefit from its weak position and take extra share points.
Although additional commission payments, or sur-commissions, are known to exist in other media, particularly outdoor, this is the first time TV has been tainted by them. They can take the form of payment for research projects or consultancies ostensibly carried out on the media owner's behalf. The investigations come at a damaging time for TV as a whole - the TV companies are preparing to put on a united front to market the medium to advertisers in an offensive this spring.
It could also damage agencies and their relationship with advertisers, as there is the implication that some have benefited from a misappropriation of ad budgets.
The scale of the problem is not clear as agency broadcast directors are unwilling to comment on the issue. This has led to speculation that the majority of the major agencies may have received extra commissions for using IDS channels. One broadcast director commented: "Let he who is without sin cast the first stone." Telewest refused to comment on the story.
- Comment, p44
IDS UNDER SIEGE
- 2005 deal negotiations have been suspended until the investigation is
- Telephone discussions between IDS and agencies are being recorded by
- Representatives from Telewest have been present at agency deal
discussions with IDS sales staff