Should agency deals be outlawed from the TV market? Laser Sales seems to
be suggesting that a move to client-by-client dealing might help to
restore credibility in the aftermath of its dispute with CIA. Could this
work or would many small and medium-sized advertisers lose more than
they could gain? Alasdair Reid reports
After weeks of uncertainty in the television airtime market, at last
there is some good news - the CIA-Laser dispute is now in the final
stages of resolution. But the most important aspect of last week’s news
is not so much that the past is being swept under the carpet but that
those involved - at least on the sales side - are prepared to address
long-term structural problems within the trading system.
Laser has announced that in the future it will trade with CIA
Medianetwork on a client-by-client basis. It went further by hinting
that it would seek to do the same with all the agencies with which it
deals.
Moving away from agency deals - discounts offered against an agency’s
aggregated billings - has been on the agenda for several weeks now, with
both Carlton UK Sales and TSMS also making similar noises. Last week,
TSMS became the first sales house to offer advertisers volume discounts
officially enshrined on a ratecard. This is not quite the same thing as
outlawing agency deals but it is a start. But will these initiatives be
welcomed by the industry?
For many advertisers, these agency deals are actually quite beneficial
as they can provide greater discount and flexibility than could be
achieved alone. So who actually gains from client-by-client trading?
Tony Kenyon, the managing director of IDK Media (a CIA subsidiary), has
been heavily involved in helping to resolve the CIA-Laser dispute. It is
also likely that he will move over to head up a revamped CIA
Medianetwork TV buying department in the near future. He points out that
agency deals have evolved for good reasons. ‘It annoys me when I hear
people saying that agency deals are there as a means of upping the
agency’s cut,’ he says. ‘That’s nonsense. They are there because it
isn’t always feasible for agencies to have the resources to deal on a
client-by-client basis. Nor are the media owners able to do it. It would
be like painting the Forth Bridge - it would take them all year and
they’d finish just in time to start all over again.’
Kenyon also admits he is surprised that advertisers have been at the
forefront of those calling for agency deals to be outlawed. He’s not
sure whether this is due to ignorance or hypocrisy. ‘Quite frankly I’ve
been astounded by some of the things I’ve heard,’ he reveals. ‘Clients
fuelled much of the whole thing in the first place. Advertisers who move
their business on the basis of ludicrous promises and who insist on
their agencies working at unprofitable rates really deserve all that’s
coming to them. Most big advertisers already have individual deals. Do
other advertisers realise that once they sign on the dotted line and
then find they can’t deliver, then the problem is theirs and theirs
alone? My guess is that they are not going to be too keen on that.’
Are advertisers ignorant? Whatever happened to all that talk about
media-literate clients? Bob Wootton, the director of media services at
the Incorporated Society of British Advertisers, admits that he believes
some advertisers have been a little off the pace.
‘But we appreciate that, for some advertisers, a share deal might be
beneficial, even if they are unaware of how the deal works,’ he
concedes. ‘If there was a move to dealing entirely on a client-by-client
basis, advertisers would have to be reassured that this was not going to
be detrimental to their particular interests.
‘But we should examine some of the other points that are put forward in
defence of share deals - mainly that they allow for flexibility and
simplicity. We might argue that there are other ways of building
latitude into deals that manage to accommodate changes of plan while
ensuring cash flow for media owners.’
Wootton also maintains that a desire to make things simpler for both
buyer and seller is not, in itself, a very strong argument for propping
up a system that is creaking rather badly. He adds: ‘What we want most
of all is transparency. We all know that there is more than one way of
trading. The only argument I want to hear about agency deals is whether
or not they work for all concerned.
‘We applaud Laser taking an initiative. Right now the market needs such
initiatives. But we must ask what impact it will have on a broad church
of advertisers.’
David Connolly, the joint media director of Leo Burnett, believes that
the key issue is the effect that agency deals have on individual
clients.
‘In agency deals it is the agency, not the client, that has ownership of
the deal and such a situation is fundamentally wrong. It means the
agency is in control of the discount inventory so it can give that
benefit to one client - who may bonus the agency on results - to the
detriment of another. It also gives these agencies the opportunity to
attract new business with existing clients’ discount. The needs of
individual clients should be represented in negotiations.
‘Having said that, given that most large independent buying points
allegedly operate agency deals - and that media owners have been happy
to trade on that basis - you have to question whether there is now the
resource available to cope on either side if the market reverted to a
client-by-client trading system.’
Jerry Buhlmann, the managing director of BBJ Media Services, thinks that
might just be the point - ITV might be trying to take advantage of the
recent crisis by trying to change the balance of power.
‘You can build flexibility into client-by-client trading - I do not
think that is the issue,’ he argues. ‘But client-by-client trading
requires more resource at the point of contact between buyer and seller.
Maybe the players now believe they can out-gun media buyers and profit
from that. Both sides would have to increase their commitment and maybe
the sellers think they are best placed to do that,’ Buhlmann explains.
‘ITV’s problem is always about trying to ensure that its revenue
declines at a slower rate than its audience share. Perhaps it has judged
this to be the solution.’
