Media: Perspective - The bigger clients must follow P&G’s stance on airtime

I’ve always been reluctant to draw too many parallels between the way TV airtime is traded and some of the wackier aspects of derivatives trading that pass for sophistication in the City. But after Paul Polman of Procter and Gamble’s onslaught (Campaign, last week), now seems an appropriate time.

I’ve always been reluctant to draw too many parallels between the

way TV airtime is traded and some of the wackier aspects of derivatives

trading that pass for sophistication in the City. But after Paul Polman

of Procter and Gamble’s onslaught (Campaign, last week), now seems an

appropriate time.



Let me start by underlining one of Polman’s points. He said: ’P&G buys

advertising in over 140 countries and I can honestly say I have never

seen such an odd system (of airtime trading as in the UK). Imagine

placing an order ... in the manufacturing process without knowing how

many you will get and what the cost will be. Oh, and if the supplier

delivers fewer items than you want, then you still have to pay the full

amount.’



Polman’s right. It’s a crazy, arcane system and one that upsets all the

natural laws of supply and demand.



I found myself trying to explain it last week to a business journalist

and failed utterly. If you have a system that cannot be explained to

reasonably intelligent outsiders, then there is something wrong with

it.



Now think of the NatWest derivatives scandal and Barings before it.



In both cases disaster occurred because derivatives trading has become

so convoluted the bosses did not understand what their traders were

doing.



You might say there are enough checks and balances built into the

airtime trading system to stop the equivalent of a NatWest happening.

Maybe, maybe not. How many managing directors of TV companies - and I

don’t mean sales directors, but their bosses - really understand the way

their revenue comes in? How many chairmen or managing directors of media

buyers or agencies really understand how their broadcast directors do

their deals? And if they don’t - as I suspect - what hope do the clients

have, the people whose money is being spent?



This issue raises other aspects. First, if the only people who

understand the trading system are the insiders, it becomes

inward-looking and it breeds off itself. It’s the institutional

equivalent of incest - and we all know about the dangers of mutant genes

in inbred species.



Second, such systems develop their own logic and become resistant to

change. It’s only human. TV sales staff bonuses work off the system. So,

in some cases, do the buyers’ bonuses, which creates a dangerously

symbiotic arrangement. Thus, the only way they’ll change is when outside

forces compel them. But the way things are going, neither the TV

companies nor the buyers show much inclination to change.



So the only outside forces capable of doing this are the big

clients.



Now we have to ask if this is what they all want. Some - and you can

probably work out who - might argue privately that the price of TV

airtime is irrelevant so long as their smaller competitors can’t afford

it. In this way, the system acts as a sort of artificial barrier to

competition. The P&G move suggests this thinking has had its day.



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