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
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
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
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
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
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.