Is there really a debate happening around a zero-based rate card or will we see one media owner implement the principle and the rest follow? Celia Collins analyses the issue from a media agency perspective.
At the Amasa Forum a few weeks ago, we saw the room full of media owners but very few media/creative agencies attended… If this is a principle that affects the majority of media and creative agencies, why was there not more representation from these agencies?
We have looked at the various elements which we believe would be affected if this zero-based rate card is implemented in 2016.
Opening a level playing field with clients/agencies
Media owners will no longer have to justify why rates differ between clients and agencies. We know some media owners, have of late, been offering clients Net Net rates (rate card less discount less agency commission) anyway and then leave it up to the media agency to explain why the two rates differ. This is done to make sure that the media owner has representation with the client even if they are on strategy or not. Client will be able to see that the only variance between the two rates is the media commission portion (if a media agency is not on a monthly fee). I believe the losers in the equation will be the creative agencies, who have not informed their clients that the creative agency keeps the remaining portion of the agency commission that is not paid to media agency (which is normally in the region of eight to 13% of the 16.5%). Media agencies normally only earn between two and five percent of the agency commission portion.
More robust trading from the smaller media owners – what will happen with the bigger media owners?
The smaller media owners will become more aggressive with discounts either directly to the clients or the media agencies. We believe the smaller media owner is able to adjust margins to make sure the deal is closed whereas larger media owners do not have the ability to do this on a deal-to-deal basis. The larger media owners will look at passing an early payment discount of 16.5% – but does this then really differ from what we have now anyway? The winners here, I believe, will be the smaller media owners’ ability to become more cost effective and relevant for clients.
How will this affect the MCC accreditation if the playing field is level for media owners?
So this is an issue which I believe we have all missed out on totally. SABC said at the Amasa Forum that the reason they are looking at changing to the zero-based rate card is due to the Competition Commission. If this is the case then why do some media agencies have to belong to the MCC and not all advertisers? In theory this was to cover the media owner in case the media agency ‘goes under’. For belonging to the MCC, media agencies are able to claim the 16.5% commission or early payment discount. However, this is not consistently applied across clients directly and not all media agencies are accredited therefore surely the Competition Commission should look into this aspect too?
If media agencies take out insurance against their clients then should media owners be taking out their own insurance on direct clients, media agencies and PR agencies? This would then be fair if media owners wanted to be covered and would be equally fair across the board. It was stated that each case is individually assessed, but surely if you apply a media ruling it should be done across the board to be fairly represented. MCC would lose and so would media owners on this cover.
Technology changes – who pays for all of this?
Another element brought to our attention – who is going to pay for all the system changes from a media owner perspective and a media agency perspective? All systems would have to be changed and once again would affect media agencies big and small and media owners. Can the smaller companies afford this in our current economy?
I do not believe this is an issue; if there are agencies out there not fully transparent by now, then it is time they jack themselves up and become transparent. Some media owners believe media agencies are not transparent but with how “we” are audited globally and by our global clients makes it impossible not to be fully transparent. If agencies are still doing deals ‘under the table’ then it is time they are exposed and consistency comes into trading and a level field is created.
We believe if zero-based rate cards happens or not, there are financial implications and all media and creative agencies need to have an action plan on how they will manage the process. From a media owner perspective, they to need to weigh up their own options and financial implications – if this is just to be more transparent to ‘appease’ the Competition Commission, then great but what we can’t have is over 900 media owners all implementing different systems for different reasons – one common system. To be or not to be!
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