Magazine article Marketing

Media Analysis: Held to Ransom

Magazine article Marketing

Media Analysis: Held to Ransom

Article excerpt

Big advertisers are putting pressure on media owners to extend payment terms.

As the financial house of cards continues to tumble, some advertisers are attempting to improve their cash flow by asking media owners to extend credit payment terms, with the implicit threat that they may be dropped from the schedule if they do not comply.

Last week, drinks companies Anheuser-Busch and Diageo wrote to media owners saying that they were lengthening their payment periods to 120 and 60 days respectively; cash-strapped General Motors is thought to have taken similar steps. Media owners and media agencies, however, are in no shape to absorb the costs that come with delayed payments.

Nick Bampton, senior vice-president and managing director at MTV sales house Viacom Brand Solutions, says that while it is understandable that brands want to hold off on paying for media space for as long as possible, it merely pushes the problem onto another company suffering similarly in the recession.

'TV companies are not in the position to take on these financial burdens,' says Bampton. 'During extraordinary times companies need to take more risks in order to get things going but it's not a 'one size fits all' scenario. Until times get better, media owners and agencies will have to sit down with clients and work out what is best for everyone.'

Strong-arm tactics

The Institute of Practitioners in Advertising (IPA), which represents agencies, has also criticised brands attempting to shift costs to media suppliers. Marina Palomba, legal affairs officer at the IPA, called it an 'appalling tactic', aimed at bullying smaller businesses into submission.

InBev, Anheuser-Busch's owner, has defended its approach, however. It says: 'We value greatly the suppliers that we work with. It may take time for some of the suppliers to get used to the new system but we will do what we can to help them with the transition.'

John Billett, chief executive of media auditing firm, does not accept this. 'Why should an agency bend over backwards to help the cash flow of a brand?' he asks. 'An agency is not a bank. This is simply the short route to bankruptcy for any agency, especially now as credit insurance is more difficult to get.'

The standard payment period for media supplier contracts is 25 days. This is shorter than many suppliers in other sectors, but because of the amount of money involved, it is more pressing for ad campaigns to be paid for promptly. …

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