CBS, NBC Drop Old Ad Fees: Puts Light On ABC As Lone Holdout
ANA chief Bob Liodice claimed a certain level of victory with the organization's efforts to eliminate the decades-old fees that ABC, CBS and NBC had charged for the physical work of inserting ads in the system before they run. Liodice said Thursday that CBS and NBC have dropped the so-called network-integration fees, while ABC still charges "on occasion." Three years ago, the ANA (Association of National Advertisers) and the 4As joined together to lobby ABC, CBS and NBC to drop the practice, which the ANA said could run an advertiser about $470 for a prime-time spot. Now, the ANA is urging its membership to resist ABC's holdout and "spur a dialogue" with the network "at every opportunity."
"These fees are costly, burdensome and irrelevant, especially in today's digital environment," Liodice said at the ANA's annual TV & Video Forum in an opening address.
An ABC representative did not immediately respond to a request for comment.
The ANA has maintained that advertisers had been assessed integration fees, totaling an estimated $125 million a year, "without providing any benefit" to marketers.
When Fox formed in 2007, it opted not to charge the fees to gain a competitive edge, while cable networks, the CW and Univision also never instituted them.
In his address, Liodice also said the Ad-ID coding system for commercials is set to usher in an era of brand-specific commercial ratings from Nielsen -- true commercial ratings. He said the technology needed for the encoding -- Nielsen will use Ad-ID along with its current watermarking system -- for individual tracking of ads should be in place later this year.
Liodice would not offer a specific timetable for a subsequent launch of a commercial ratings system. Nielsen said the measurement company is in an R&D phase and "we will support the industry when and if they want commercial ratings."
The ANA started lobbying for the granular -- "how many people actually had the opportunity to see my spot?" -- ratings in 2007. The push led to the current C3 ratings -- an average rating of commercial minutes during a program that incorporates DVR-enabled viewing, the basis for the national TV marketplace. On brand-specific commercial ratings, Liodice said: "We will leave it up to the buyers and sellers to determine the implications of these ratings in valuing the currency of TV advertising. But for now, we appreciate the opportunity to materially move up the marketing accountability ladder."
A Nielsen representative declined to offer a timetable on the brand-specific ratings in an email, but wrote: "We continue to consult with clients on whether they want commercial ratings and to advise them on what steps need to be taken to implement those ratings." Separately, Liodice said the ANA and Canoe Ventures planned study on interactive TV effectiveness is taking shape with five advertisers set to participate: Fidelity Investments, GlaxoSmithKline, Honda, Kimberly Clark and State Farm.
"Nationally-scaled iTV has the potential to create an entirely new caliber of television advertising that is more relevant, more memorable and engaging than anything we have experienced to date," he said, citing the types of ads that can lead to a viewer having a sample product sent to their homes after a click with the remote.
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No different here than what the banks did when the government restricted credit card fees...they just created other service fees elsewhere to maintain revenues. Business 101.
At least the old integration charges were a fixed and published quantity...and traditionally were paid out of a client's production budget.
After negotiating your media deals as best you could with the networks, you could then separately address the integration charge issue. A little clearer idea of what was being discounted and where.
By adding those lost integration revenues into inventory pricing, an already murky "bottom" becomes even more obscure when negotiating and I'm betting the networks will come out ahead.
Oh...and don't look for your clients to add their old integration budgets into your media budgets anytime soon.