One of the hottest topics of 2015 was the murky practice of media rebates, which -- depending on whom you choose to listen to -- are either totally not a problem or are a huge problem that threatens the very existence of the media world as we know it.
Or maybe somewhere in between. Personally I have no idea.
However, one British newspaper publisher, the Daily Mail & General Trust, has given the industry a rare peek into the amount that media vendors, or at least one media vendor, shells out in rebates to media-buying agencies in a typical year.
For the first time this year, the publisher shared the figures as part of its annual report, covering the year through September 2015.
In the report, the company stated: “The DMG Media segment enters into agreements with advertising agencies and certain clients, which are subject to a minimum spend and typically include a commitment to deliver rebates to the agency or client based on the level of agency spend over the contract period.
"These rebates can take the form of free advertising space, cash payments or both. The rebate provision is calculated using the forecast spend over the contract period and rebate entitlement set out in the trading agreement.”
According to the DMGT report, its newspaper publishing division, DMG Media, paid out £25.6 million in cash rebates, discounts, and free advertising space for agencies and advertising clients, as part of deals meant to sell more inventory by rewarding buyers for bigger purchases. That works out to around $38 million in U.S. currency.
To put that in perspective, DMGT took in advertising revenues of £351 million for the year, or about $523 million. Thus, the rebates represented about 7% of its total advertising business.
That’s not a huge amount, but there is also no way to know just how cost-effective the practice is for the Daily Mail, since it didn’t say what proportion of its revenues were incremental or additional spending enabled by the rebates.
The company noted that it spent a similar amount in 2014, with £26.2 million in free advertising or cash payments.