Publicis Media is likely to keep ads from its clients off Channel 4 for the whole of January amid signs that the trading row could continue into February.
The dispute is now in its third week, after Publicis Media and Channel 4 failed to agree terms for a new trading deal by the start of this month.
Media traders believe Publicis Media has already "redistributed" clients’ money that it would have expected to spend with Channel 4 in January by investing with other media owners, chiefly the two rival TV sales houses, ITV and Sky.
That would mean Channel 4, whose most popular programmes include Gogglebox and The Great British Bake Off, is unlikely to get any money from Publicis Media clients this month – with the exception of Procter & Gamble, which has its own deal with the state-owned commercial broadcaster.
The dispute could cost Channel 4 the best part of £10m in lost revenue in January, given industry estimates that Publicis Media’s non-P&G clients spend about £125m annually with Channel 4’s sales house, which also manages ad sales for UKTV and BT Sport.
Industry observers believe there has been little meaningful dialogue at a senior level between the two sides, although one source maintained that there has been regular communication.
There has been no sign of a truce and it should soon become apparent if the row will last into February.
Media traders said an agency group would usually need to make a decision about switching its spend before the last week of January to ensure it still has a decent price in February, rather than leaving it to the last minute.
Several sources said it was possible that the dispute could drag on for several months and, in an extreme case, all year.
Publicis Media is believed to be pushing Channel 4 to move to a largely "volume-based" deal, which would give the agency group a discount based on volume of spend.
Channel 4 is said to be keen to keep a "share-based" element, which would continue to link any discount to Publicis Media’s share of TV spend with Channel 4 relative to its spend with ITV and Sky.
It is thought that Channel 4 has concerns that Publicis Media has been reducing its investment in TV and a volume-based deal might encourage that, with no guarantees on spend.
Both Channel 4 and Publicis Media will be calculating how long the impasse can continue without a deal.
About 10% of the Channel 4 sales house’s £1.2bn annual revenue is potentially at risk and observers suggested that the broadcaster could look to bring in money from other agency groups to make up the shortfall.
Publicis Media’s decision to pull its money could push down the average price on Channel 4 in the short term, hypothetically making it cheaper for other agency groups to advertise with the broadcaster.
Meanwhile, Publicis Media and its agencies, which include Zenith, Starcom, Blue 449 and Spark Foundry, will be trying to persuade clients that they can plan around Channel 4, by using other broadcasters and media channels to ensure the same audience reach and frequency.
Channel 4 and its youth channel E4 in particular continue to bring in significant audiences of 16- to 34-year-olds, but total TV viewing has been in decline across the industry and advertisers have new routes such as YouTube, Instagram and Snapchat to reach young consumers.
The broadcaster has written to some of Publicis Media's clients to explain its stance and the response of the clients is likely to be crucial in the weeks ahead.
Channel 4 is already facing its longest boycott by an agency group in recent memory; WPP’s Group M pulled its estimated £250m annual media spend for two weeks in January 2013.
WPP controls a third of the market, whereas Publicis Media has about 16%, meaning the stakes are lower this time round for Channel 4.
Trading disputes can force change, however. When Omnicom pulled its money from Channel 5 in 2014 for more than a year, the broadcaster ended up closing its sales house and outsourcing ad sales to Sky.
ITV has about 45% of TV ad sales and Channel 4 and Sky each has about 27%.
Broadcasters typically agree annual and multi-year deals with agency groups that are based on share of spend.
ITV is bound by legislation called contract rights renewal (CRR) that protects advertisers and gives them the right to keep their historic share deals with the broadcaster.
However, some critics have claimed that CRR has stifled innovation by focusing on share, rather than volume, at a time when some advertisers and agency groups have been moving money into Google and Facebook.
A so-called "grey market" has grown in recent years, with some agency groups and broadcasters looking to generate revenues outside share deals by expanding in new areas such as video-on-demand, branded content, sponsorship and TV programme finance.
Channel 4 is more dependent than its rivals on advertising, which generates the vast majority of its revenue.