Media Analysis: Clients Lose in Trading Conspiracy

Marketing, April 28, 2004 | Go to article overview

Media Analysis: Clients Lose in Trading Conspiracy


Contract Rights Renewal was devised to protect advertisers under a merged ITV. It doesn't, writes Colin Grimshaw.

With the first TV trading round since the ITV merger now complete, TV buyers are assessing the implications of the new trading environment.

Many believe the Contract Rights Renewal (CRR) remedy is not offering the protection that was promised.

Specifically, they warn that clients that switch media agencies may not be able to take their existing ITV advertising terms with them, let alone seek improved ones.

In February Marketing reported that Boots and Churchill Insurance were caught up in a dispute with ITV over their new agency MediaCom's efforts to secure better terms for them. The spat was the first to be referred to Ofcom adjudicator David Connolly. Such is the secrecy surrounding TV trading issues, it is not clear how it was resolved.

Although in principle CRR enshrines advertisers' right to move their ITV account from one agency to another, ITV is allowed to block a move into an agency's group deal - that is, one that pools clients' requirements - if it 'materially' harms its business (see box).

Specifically, ITV can block a new client-agency arrangement if it is 'overtraded' - that is, it has sold more ad airtime than it has to sell.

But buyers complain that ITV can manipulate its position to claim it is overtraded. TV trading's complexities mean it would be tough for anyone - including the Ofcom adjudicator - to prove otherwise.

Striking a balance

After blocking, ITV is obliged to offer 'fair and reasonable' terms to the agency so that it can accommodate the client. However, buyers also complain that the terms 'material,' 'fair' and 'reasonable' are subjective.

Rather than referring the dispute to the adjudicator, buyers are inclined to horse-trade with ITV to get the terms they promised to their new client.

This horse-trading has implications for the vast majority of advertisers who do not have a contract directly with ITV, but are part of an agency contract. These are implications agencies would rather clients did not know about. To accommodate a new client, agencies are being forced to massage the terms for other clients, often to their disadvantage.

This massaging is also likely to occur when an agency loses a client, particularly if that client was a big spender on ITV. Under CRR, agencies are only allowed to reduce their TV share commitment to ITV in line with falls in its audience share. To plug the gap left by the departing client, agencies need to win another client, or persuade existing ones to shift more of their TV spend from other channels onto ITV.

Phil Georgiadis, a partner at Walker Media, one of the few agencies that does not have pooled agency deals, says there is a silent conspiracy between TV buyers and sellers.

Even though ITV may be interpreting CRR to suit its own ends, he adds, agencies are unable to employ the ultimate negotiating sanction of pulling a client's ads off ITV for fear of the impact on its pooled agency deal and other clients. …

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