• by David Goetzl , July 16, 2008

Advertisers' latest push to abolish network integration fees has hit another roadblock, this time from CBS. While NBC and ABC declined to discuss the issue with trade groups, CBS participated in a recent meeting--yet showed little willingness to work toward a middle ground.

In the meeting, CBS executives offered some explanations for why the network continues to charge the fees. Among their justifications: commercials that should run 30 seconds are often submitted too long or too short, requiring CBS to contact an agency and work through the logistics.

Also mentioned was that frequently the wrong creative is submitted, again forcing the network to engage in a back-and-forth with an agency.

At the meeting, a CBS executive said that the time and effort required to resolve those issues partly justify the added fees, according to sources familiar with the matter.

CBS officials at the meeting were head of network sales Jo Ann Ross; top pricing and planning executive Dean Kaplan; and an attorney. They met with executives from the Association of National Advertisers (ANA) and the American Association of Advertising Agencies (AAAA)--both of which had asked NBC, ABC and CBS in February to join them on a task force to discuss the practice of charging integration fees.

A CBS representative declined comment. Reached while traveling, Bill Duggan, ANA executive vice president, also declined comment, except to say: "We're pleased that [CBS] met with us." A representative for the AAAAs said: "We don't comment on meetings that we conduct."

NBC, ABC and CBS have charged integration fees--which now run about $550 per prime-time spot and in the $250 to $275 range for other dayparts--for decades. But the fees were initiated when networks had to manually insert ads into programming, a process that no longer exists.

Advertisers and agencies are frustrated not only that they are charged for an obsolete process, but that the fees are automatically tacked on. ABC sales chief Mike Shaw said in April that if the fees were eliminated, the network would have to make up the lost revenue elsewhere, with the implication that pricing would be higher. But a top agency executive said at least that would be subject to negotiation.

NBC and ABC declined to meet with executives from the ANA or AAAAs on grounds that each preferred to take up the issue with their clients on their own. The trade groups had hoped to have a task force in place with meaningful discussion by May 1.

Only the three oldest broadcasters charge integration fees. Fox does not, nor do any cable networks--including those within the same conglomerate as the networks that charge them. Within Disney, ABC charges, but ESPN does not. At NBC Universal, NBC charges the fees, but not USA or Bravo.

Media agency TargetCast tcm estimates that the three networks collectively took in $125 million in integration fees last year. One source said the top 10 advertisers can each amass costs in the seven-figure range each year, while other large advertisers can run up costs in the six-figure range.

ANA's Duggan did say that while advertisers have objected to the fees for years, their opposition has recently been ratcheted up.

"That's kind of the new wrinkle in the last half a dozen years--the rise of the corporate procurement officers [on the client side] that are really questioning various costs," Duggan said. "And integration fees have kind of found their way into their sight."

Andy Donchin, a top executive at agency Carat, said he expects advertisers to continue to press the three networks to drop the charges. "It will always be on our radar screen," he said. "We still see it as an unwanted expense."