Opinion: Are media agencies set to become irrelevant?

You need look no further than the revelation this week that ITV is proposing a three-way merger with Channel 4 and 5 to understand how desperate some mainstays of the British media industry are becoming.

Against the backdrop of such patent, and outlandish, panic in the sector, the performance of media agencies in this week's Nielsen billings tables is really quite encouraging.

The overall decline in media billings was 5 per cent. In a climate where anything less than a double-digit slump is an achievement (and where creative agencies suffered a 7.4 per cent slide in billings) this is a comfort. But a transient one. Our story about newspapers' January revenues (page 3) is a clear indication of the turn of the tide.

The challenges for media agencies right now are dramatic. Not only have falling interest rates reduced a traditional revenue source for media companies, but the recession is again forcing advertisers to question media transparency, and not just in the murky world of outdoor advertising.

And if you watch our interviews with some of the UK's most senior advertisers on our Campaign/Accenture video (www.campaignlive.co.uk), you'll hear Nokia's marketing director, Will Harris, question the very rationale for media agencies. In a world where recession is forcing clients to explore solutions beyond traditional media, Harris says "the whole concept of a media agency is fast becoming an irrelevance, if I'm being really honest".

I'm sure there are plenty of media people frothing by this point, but even people in the thick of the media agency world are questioning their future. One media agency chief executive told me recently: "The game's up. We've tried to go upstream, to sell clients a sophisticated service rooted in strategic insight. But all they want really is cheap media: cut-throat prices from media owners and from media agencies."

Now, maybe I caught him on a bad day, but I'm not so sure. Another global media agency chief recently told me he'd been shocked to realise that all the years of (in his view) superior service, valuable insight and clever thinking his agency had put into an international client (for a decent fee, of course) counted for absolutely nothing when the client put the business up for pitch a few months ago in what was essentially an auction: cost was the only real criteria. Naive? Perhaps. Depressing? Definitely.

Could media be forced to turn the clock back to the days when their service was defined by "gorillas with calculators"? It seems unthinkable, let alone unworkable with current agency structures and overheads. And it would be entirely wrong to assume that cost-effectiveness is the same thing as cheap; the most efficient media agencies buy the right media at competitive prices and offer clients exactly the sort of intelligent insight that reduces wastage, maximises impact and shifts product.

What the economic downturn will undoubtedly do, though, is focus clients' minds on who they are actually paying for this sort of insight; they are not going to tolerate paying for it several times over from creative agencies, media agencies and strategic specialists. Media agencies need to stake a firmer claim than ever on the territory, though, or they could become the irrelevance Harris predicts.