Formal and transparent volume discounts will start to make ITV more
accountable to advertisers and help shape a reward-based market, Jerry
Mandy Pooler raised a number of important issues in her opinion piece
(Campaign, 15 November). But it might be useful to go further and look
at how we might change the whole system of TV trading. The structure of
trading in the UK market, specifically regarding ITV, has been a
simmering issue for a number of years. It was highlighted first by
Yorkshire Television overdealing and recently by CIA overtrading.
The motivation appears to have been to find a short cut to more revenue
or greater discount. The only real surprise in a market swarming with
media and financial auditors is how anyone imagined these actions would
not come to light.
Recent events have provoked much discontent among advertisers who have
to make financial guarantees in return for unspecified price increases.
Changing the system will not be easy. The removal of station average
price is often held up as the route to a better way of trading. But you
can already have a perfectly amicable negotiation without linking
yourself, or the TV contractor, to station price. The reality, however,
is that when both parties get back to the office, the first thing they
do is see how the deal stacks up against the market.
Nobody can ‘uninvent’ station price. When ITV starts taking less than 50
per cent of commercial TV advertising revenue, station price will simply
die of old age, but it will not disappear before then.
In reality, overtrading and overdealing are the dodgy end of a complex
system, which involves advertisers trying to squeeze every point of
discount out of the airtime inventory, while TV contractors aim to
maximise the yield per 30 seconds. The whole premise of the system is
that the volume of revenue is a given and here is the key to changing
the system. Currently ITV sales houses fight among themselves for share
of revenue. There needs to be a more tangible link between advertiser
value and airtime delivery.
I would like to see formal, transparent volume discounts for
advertisers, based on spend thresholds linked to investment. This would
build in reward and additional value to the advertisers who deserve it
most. These volume discounts would be rebatable sums that could be paid
directly to advertisers. These discounts should be increased if
audiences fall below a respectable delivery band. This increased rebate
would help mitigate cost inflation and would focus ITV on taking
audience from the BBC instead of maximising revenue share.
This change would make ITV more accountable to advertisers by linking
its performance more closely to its audience delivery. For example, if
an advertiser spent pounds 10 million, it would receive a rebate of 5
per cent. If audiences have fallen by more than, say, 5 per cent at the
end of the year, the advertiser would receive an additional 2.5 per cent
This scheme could be operated by sales houses, individual TV groups or
by ITV as a whole. It would deliver a fairer, more transparent system.
It would also be a forerunner to a truly multi-channel commercial TV
environment where advertiser volume discounts, price negotiations versus
previous year and fixed-rate deals would all be commonplace.
In the medium term, Barb, the current industry audience measurement
system tool, will become redundant and the measure of value will be
based much more on qualitative values and advertising effectiveness.
This will produce a market where those agencies and advertisers with the
best-quality knowledge and research will have a clear advantage and will
be more likely to trade on a rate-per-minute basis.
In this market, vision, better consumer understanding and quality
planning will be the critical performance criteria.