Media Forum: Is commission flat broke? - Does the latest Aegis row spell the end for commission, Alasdair Reid asks

It's astonishing the number of times the commission system has seemingly been pronounced dead in recent years. Take, for instance, the financial crisis at Interpublic Group, which prompted it to break ranks and position itself as whiter than white - promising to meet the highest standards demanded by new Sarbanes-Oxley accounting rules in the US and end the kickback culture prevalent in media trading in many markets around the globe. Naming no names.

All of which served to remind everyone concerned that the commission system was a means of trading barely fit for the 19th century. Especially as agencies were seeking to position themselves as business consultancies, offering high-level strategic communications advice, rather than as dim gofers paid piecework rates.

And then there's been the rise of Google and other internet media owners, who've made it their business to find ways of trading directly with advertisers themselves. As we move towards an era where all media will be digital, it would seem, in theory at least, that there's very little room for a system that makes agency remuneration the responsibility principally of the media owner rather than the client.

In any case, some advertisers demand all the commission back again and leave media agencies to forage for a living on the investment cut they can take on the money while it's passing through their hands. As, indeed, the latest dispute between Aegis and media owners tends to show. Aegis has served notice to some small media owners that it intends unilaterally to change its settlement terms, currently (depending on the medium) 25 to 31 days, to 60 days.

Keeping the money for longer will make it work harder for Aegis - and Aegis is traditionally the group that makes a virtue of working for the most competitive of commission rates.

This, surely, only goes to prove how silly the whole business has become. Isn't it time we moved on? Jim Marshall, the chairman of Starcom, clearly thinks so. He says: "In most other business sectors you can think of, suppliers tend to have variable terms of business with their customers. Why not advertising and media? My feeling is that it's sort of happening anyway, and that we are holding on to the last vestiges of the system for less than convincing reasons. And maybe this is something we have to look at an industry [trade body] level."

Perhaps, Bob Wootton, ISBA's director of media and advertising, responds, but the real world tends to be rather more complicated. He says: "Our view in general is that this is not a game between strangers. Advertisers will have more or less established relationships with their agencies, and they have relationships of considerable standing with media owners. There are no simplistic ways of addressing this.

The media owners we contacted declined to take part in this Forum. By and large, though, they were extremely sceptical about the ability of any agency to impose unilateral demands on the industry - though, in the end, they concede that all things are negotiable.

Jerry Hill, Initiative's joint chief operating officer for Europe, argues that the new demands imposed by trading conditions in a rapidly evolving digital media market will have implications for all of the players in the media business. "The digital environment changes the ratio between spend and effort," he explains. If agencies aren't adequately remunerated for the work they do, he adds, then quality of advice will decline.

Jed Glanvill, the chief executive of MindShare, agrees. He says: "There was a time when commission was arguably a pure remuneration system - because if the advertising was working, the client was likely to do more of it. But it's less appropriate as we move into more of a consultancy role. However, to my mind, this is an issue that should remain private between the agency and each client. Every arrangement should be bespoke because every client is different."

YES - JIM MARSHALL, CHAIRMAN, STARCOM - "This clearly puts yet another question mark on the whole area of commission and the need for such a rigid system. I'd be happy to see media owners talking about terms of business on a variable basis."

NO - Bob Wootton, director, media and advertising, ISBA - "I've always believed in funding for the basic staffing on the account, with this fee being topped up according to workload. But it's a leap to suggest this situation has fundamental implications."

MAYBE - Jerry Hill, European joint chief operating officer, Initiative - "The remuneration system should be restructured to provide fees equivalent to the old media commission. If that doesn't happen, agencies will turn to the media to fill the financial gap."

YES - JED GLANVILL, CHIEF EXECUTIVE, MINDSHARE - "In a world where distribution structures are changing so dramatically, you do have to question why the old rules should apply. Why, for instance, shouldn't clients pay more for the quality of the idea when it's the creative ideas that make a difference?"

Got a view? E-mail us at campaign@haymarket.com.

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