A couple of weeks back, Michael Hebel, head of advertising for
Unilever, denounced the way TV airtime in the UK is traded against a
benchmark called station average price. But then station average price
is like the weather - you might grumble about it, but it’s always there.
Except, of course, for the fact that people tend to listen to Unilever
heads of advertising.
And except for the fact that this was no run of the mill moan. Usually
station average price comes under fire when there’s a crisis - when a
deal between buyer and seller reaches breaking point. Hebel’s point is
not that the wheels sometimes come off, but that the system is
fundamentally wrong. It inevitably produces airtime inflation.
The Incorporated Society of British Advertisers and the Office of Fair
Trading were obviously listening. Last week, ISBA announced that it is
to hold a seminar on station average price, probably in the next couple
of months. And the OFT, which recently began looking into the way that
ITV constructs some of its deals, is asking some fundamental questions
about station average price.
This is serious stuff. The issue is now firmly on the agenda. Station
average price trading is basically a floating price system. The more
money there is coming into the market, the higher station average price
becomes. But the biggest advertisers are always guaranteed to get the
best prices, whatever the state of the market. It takes an element of
risk out of the system - when prices move upwards, you can take some
consolation from the fact that everyone is suffering.
And that, according to Hebel, is also its main fault. It masks the fact
that absolute prices have been continuing to rise. The main alternative
- straightforward fixed price purchasing - lays bare the horrors of
But it is also a huge futures gamble. If you buy long and pay big bucks
only to see the market starting to collapse, you look silly.
Sales points, including ITV’s, tend to say that they are more than
willing to please. They’ll trade in just about any way that people want.
But when advertisers are asked to put up or shut up, they tend to stick
with what they know. And if you want any proof of that, they say, look
no further than the salutary lesson of the MAS debacle. MAS, then
Yorkshire’s sales house, tried to introduce fixed price trading in 1991.
It was a disaster.
Tess Alps, the chairman of Drum PHD, was at MAS back then. She says she
was surprised at the way their ’hands were bitten’ by clients. ’They
seemed to be saying there was nothing in it for them. And agencies
certainly don’t like to rock the boat. Fixed prices might offer you a
way of controlling inflation but prices can go up as well as down.
’Station average price is simpler to operate than fixed rate. And the
truth is that there is nothing in fixed price trading for media owners,
especially those who sell at a premium - like ITV. Even Channel 4, which
introduced fixed pricing when it started selling its own airtime, has
retreated from that as it has become more expensive. ITV will never
willingly do it. Nor should it. There are too many inbuilt mechanisms
operating across the industry that would have to go or be redesigned.
The drive would have to come from clients. I doubt it’s going to
So what’s the fuss about, if no-one really stands to gain? The rumours
are that some of the biggest advertisers have realised that they are the
market. They have a better idea than anyone which way the market is
likely to go - when they’re spending, the market goes up; when they
don’t, it goes down. Simple as that. So they face relatively little risk
in opting for fixed prices. In short, it could increase the competitive
advantage of the larger players - and that’s something they feel they’re
entitled to. Unilever, for instance, is already believed to have a large
fixed price component on the deals it has for many of its brands.
That’s not exactly how Bob Wootton, ISBA’s director of media and
advertising affairs, sees things. He takes issue with the theory that
advertisers were responsible for roasting MAS. ’Advertisers have always
put their media suppliers under pressure to deliver and agencies respond
in all sorts of ways - and picking on the supposedly weakest is perhaps
one of them. But the MAS situation was not directly advertiser-driven
nor should you infer from what happened that advertisers are by nature
resistant to change.’
But he also doubts whether size is a determining factor here. ’That’s
one of the things we hope our forum will reveal,’ he adds. ’It is by no
means clear that this is an entirely volume-driven market.’
Many in the industry are sceptical about whether there is any need to
change the system. John Billett, the chief ex-ecutive of the Billett
Consultancy, says it’s important to separate the issues of price and
value. ’These days, station average price never features in any of the
evaluations we do for clients. Our measure is cost per thousand modified
by a number of quality criteria - coverage, speed-of-coverage build,
programme environment, centre versus end breaks, position in break and
efficiency of targeting.
’What we are saying is that the petrol price per gallon is no measure of
the petrol consumption performance of your engine, nor indeed of the
quality of your journey. There will always be a need for a trading
mechanism like station average price and, once you’ve invented one, it’s
almost impossible to ’uninvent’ it. Even with fixed prices, everyone
would just calculate backwards to station average.’
Paul Taylor, the managing director of BMP Optimum, tends to agree. And
he rejects the idea that there might be inertia because of
infrastructure issues. ’When Channel 4 began trading on fixed prices in
1993, it didn’t prove a problem to anyone. It’s fashionable to point to
station average price as a major catalyst in inflation. But the reality
is that most advertisers are evaluating the actual prices they’re paying
and not the discounts they’ve been getting via their agencies. And
station average price has many benefits. The main thing is that it
allows terrific flexibility for advertisers - and many of them actually