Aegis Media is trying to squeeze media owners credit terms, without prior warning, blaming the “growing influence” of client procurement departments. The move is likely to make its major agency arm Carat an extra 1% commission.
Group finance director John Foster has written to media owners explaining that Carat intends to pay them a month later.
In the letter, leaked to Marketing Week, he says that the media advertising industry has had “favourable” payment terms varying between 25 days and 31 days from the end of the month in which advertising appears. From July 1, Aegis intends to extend payment terms of “all” media advertising to 60 days after the end of the month in which ads appear.
One sales chief estimates the changes could lead to the agency making the equivalent of an extra 1% commission over the course of a year.
Foster says client procurement departments have had increasing influence over client contract negotiations in recent years, and extended credit terms has been one of the areas they have been targeting.
He writes: “Maintaining the current favourable credit terms has become increasingly unsustainable. This will necessitate in turn amendment of our payment terms with yourselves and the other media owners.”
It is unclear which
media owners have been approached, although it is thought to affect smaller businesses at this stage.
One media executive that Aegis has written to says the decision is “unprecedented”. He calls the move “unique and unilateral” and claims Aegis is essentially blaming its clients for giving it cashflow problems.
He says no other planning and buying shop has attempted to change “industry standard” terms. Across broadcasting, payment terms generally land 25 days from the end of the month in which the advertising appears, although ITV has tightened its terms to the 15th day.
Foster was unavailable for comment at the time of going to press.