When COI makes a move, the rest of the agency world watches closely. The decision by the Government’s internal communications specialist to review its buying last month could represent the high watermark of the agency deal.
COI is regarded as the thought-leader among the UK’s larger advertisers, and the organisation’s review by former RAB boss Douglas McArthur will be watched closely.
The Government has previously award-ed buying to different media agencies by medium, but now recognises that in today’s multiplatform environment media owners are multi-channel distributors through a variety of touchpoints.
The same logic behind COI’s review also applies to the agency deal. The beneficiary of the volume deal has always been the agency rather than its clients. Agencies “portfolio manage” the benefits of their deals across the client base. These deals still work for the largest advertisers, but I would hate to be a client outside the top five clients of a big network. The agency has become the media owner, deciding who gets what and the client company now has to negotiate with their media supplier for a share.
This approach delivers no value if a client wants to build a series of interactive platforms and is looking to integrate IPTV into its mix. Everyone wants share deals to disappear, media executives say they restrict innovation and are based on outdated trading practices.
Media owners know their future lies in innovation and technology, which cannot be traded on average cost-per-thousand and rolled up into multi-million pound share deals; yet no one has been bold enough to break ranks.
Nonetheless, bespoke negotiation is more time consuming and requires more skill. It also rewards innovation and is better suited to clients’ needs. Increasingly in the new TV landscape we focus on minimising wastage as a means of delivering added value. For real value, a bespoke approach is needed to integrate with digital channels; this couldn’t be done in a group deal.
So why have clients allowed this situation to develop? Offline media can be treated as a commodity, it can be reduced to simple metrics and overstretched clients can conveniently ignore it; it’s traded, measured, audited and everyone gets a discount. Macro economics imply that volume always drives lower pricing, so it’s logical that agency deals will deliver best value. However, media isn’t a commodity, especially now.
Here are a couple of scenarios that show how agency deals fail to deliver: A new TV channel launches and delivers a significant upmarket audience. A brand might think it wants to spend money there. But it can’t because its agency has already committed expenditure. And it may penalise the client brand for any changes.
This approach has stymied innovation in programming as smaller broadcasters are unable to monetise audiences. Take Heroes. When the show originally aired on the Sci-Fi Channel, it restricted the number of ad breaks because Sky – which sells the channel – had no way to pay for it. Agency deals meant that advertisers couldn’t access one of the best shows to come out of the US for years. It’s now a runaway hit on BBC2 but commercial TV had it first.
Scenario two: This weekend, ITV1 will have one of the greatest sporting weekends in its history. Hamilton could be crowned F1 world champion and England could win the Rugby World Cup. An audience of over 4 million ABC1 men can be expected.
So what happens if clients tell their agency they want to advertise at the last minute? They must incur late booking penalties, probably pre-negotiated in an agency deal. If all is OK, they can proceed. And if just one client makes this move the agency is probably safe; the real problems start when multiple clients want to advertise. The fact is that most agency deal books cannot accommodate a late swing in expenditure especially with the year-end so close, and a 30-second break spot at half time trading at up to £250,000 on a national basis.
So what will happen to the agency deal? Forward-thinking organisations like COI will drive change and others will question how media budgets are spent. Clients who want media solutions that suit them rather than the agency deal will continue to turn to the increasing number of operations that believe bespoke is better.
Pedro Avery is managing director of BLM Trading and Futures