Ad Insertion Fees Over At NBC, CBS, Cost Hikes Remain

by , Feb 11, 2011, 2:17 PM
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New Yorkers traveling from Queens to Manhattan can cross the river faster by paying a $6.50 toll. Or they can meander over to the Queensboro Bridge and use it for free. The point is they have choice.

For decades, advertisers on ABC, CBS and NBC had to pay the toll. There was no alternate route.

If they wanted to run a spot, a network-integration fee came with it. The charges -- estimated by the ANA at $470 in prime time -- had roots when ads had to be manually inserted into a queue.

Over time, advertisers would mount aggressive lobbying against their irrelevance, but another more pressing issue might arise. While the fees added up, they might only add .05% to an individual spot's cost.

Getting information out of one of the Big Three networks can be tougher than understanding the derivatives market. When questioned about the justification of the fees -- even from the ANA, which represents the country's largest advertisers - their responses would be few, far between and fuzzy.

Now, it looks clear that agencies were for the most part successful in eliminating the charges as far back as 2008. Yet, since networks are coy, it was notable Thursday when ANA chief Bob Liodice announced that CBS and NBC had dropped them.

More remarkable was Liodice calling out ABC -- before a roomful of advertisers -- for putting up some resistance, saying ABC still assesses the price "on occasion."

Saying the fees are "burdensome and irrelevant, especially in today's digital environment," Liodice urged advertisers and agencies to press ABC and raise the issue "at every opportunity."

ANA executive Bill Duggan said later his information is ABC still asks for the fees from some scatter advertisers and new ones. An ABC representative did not immediately provide comment.

On the one hand, it's curious why CBS and NBC never tried to build goodwill by allowing the ANA to announce that they had dropped the fees. One reason could be they didn't want to draw attention to the issue, since the money is still coming in, just having moved from one pocket to the other.

A separate invoice for the integration gratuities may over, but the charges are just baked into what advertisers pay. The ANA estimates networks were costing advertisers $125 million and the networks are still garnering the revenue by charging a bit more. Shrewdly, networks didn't raise the fees year after year.

Former Optimedia executive Larry Novenstern said he lobbied for the banishment of the fees for years and had them knocked out in the 2008-09 upfront. But networks still build the costs into "legacy deals," perhaps raising a $10 CPM to $10.10.

Agency executives mind that much less. For one, it eliminates a line item on a bill sent to a client. While it makes the fees subject to a negotiation -- whether to pay the toll is a choice. If an agency spent $5 million a year with a network on them, it can talk that down.

Impressive is how long the Big Three were able to maintain the integration fees even as Fox and cable networks came along and didn't charge them. When pressed about why the fees continued, a network might argue that ads might come in too long or too short or are the wrong creative, necessitating some compensation for working with an agency to sort it out.

"There was no really good response," said former PHD chief Steve Grubbs. "And privately, they acknowledged there's probably no need for these."

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