Brokering the Best Time1 Jun, 2008 By: Thomas Haire Response
Response's Editorial Advisory Board and other media experts clash over the role and influence of media brokers in today's DRTV marketplace.
What are the positives and negatives of broker influence for clients, stations and the industry itself? Does brokering create an artificial demand that forces rates to increase, and does it harm the value proposition of the media time itself?
Doug Garnett, Atomic Direct: Let me pose a different question: Why is this even an issue? We are in an entrepreneurial business where market dynamics dictate the value of media time. The key question for anyone marketing through an infomercial should be, "Does this media pay out for me?" If not, don't buy it. If so, buy it. In truth, brokering has become an almost "moral" issue within the DRTV business. In media competitions, I've heard, "They buy through brokers," whispered against competing media agencies in the same way a mere whisper of, "He raised taxes once," can take out a political candidate. This accusation implies impropriety. But is there impropriety? Rarely.
Mike Medico, E&M Advertising: The major positive is this type of consolidation can benefit those agencies that are very active and require long-term arrangements. A major negative is that when the media is sold from broker to broker, the rates can rise dramatically. The value proposition of the media is greatly diminished in that there is no consistency in terms of the rate and if it can deliver on goal.
David Savage, Cmedia: I don't know that brokering is necessarily expanding, as the influence is less than in years past, and that's a good thing. The positives for agencies include having the ability to access additional time for a client, but the negatives include more agencies competing for the same space, creating false demand. For stations, brokering makes it easier to sell time.
Bob Yallen, Inter/Media Advertising: Among the negatives, brokering diminishes the integrity of the time by creating too many layers and minimizing the value. It does create a false sense of demand, and if you do not have a good relationship with the broker, you may have trouble acquiring the time you need. On the other hand, positives include the fact that you do not have to strip out time. There are more opportunities to pick up incremental time.
Fays: The only positive I see for a sales organization for brokering time is a network would need to staff fewer salespeople, saving on overhead. Brokering may cause an artificial demand that may be a short term band-aid, but over the long haul, building a direct relationship with the client is our goal at MTVN. I do not like the idea of a third party representing Viacom on the street with our properties.
Hawthorne: Brokers do create an artificial demand on inventory that results in higher rates. The time is not being purchased based on specific client campaign goals, but on speculation that some agency or buying service will need time and will be willing to pay a broker's rate and, quite often, an additional mark-up. On the other hand, brokers are committing to required inventory allotments that may not be manageable for a single client or agency. Cable networks, in particular, require specific time blocks to be purchased for an entire month or quarter. OTOs (one-time-only) cannot be purchased on some networks. By selling to brokers, stations/networks are being sheltered from the constant rate reduction negotiations and turning back of time.
Medved: Brokers have been an integral part of this business since the early 1980s. Debate has centered on brokering being a necessary evil, with those in favor citing the liquidity brokering provides, while those opposed stating they simply inflate rates. Brokering serves a purpose if the time being sold off was originally purchased by an agency for the use of its client base. In this case, an agency is relieving its clients of time they cannot use, and getting the time to another agency through a broker. Unnecessary inflation occurs when brokers are bidding and speculating for time on the front end.
Are there media buying agencies actually playing both sides of the fence and serving as media brokers as well? If so, how is this practice viewed in the business, and what are the benefits and/or pitfalls for media sellers and true media buying agencies?
Eden: As pressure builds from the weak economy, more agencies are entering into the brokerage world. This is making it more widely accepted, but not necessarily viewed positively. The motive is self-serving — to maintain revenue. However, this practice has a negative impact as the supply chain has an increased number of hands in the pie and the ultimate loser is the client.
Garnett: The largest media buyers use "moral" argument to try to block out smaller competition. They get away with it because only the large buyers can afford to take the risk of locking up huge sections of media time. But if we knew the truth, we would find that the media buyers who speak most loudly against brokering are the ones who benefit most from it. Anyone who locks up huge sections of time based on big commitments also has need to dump that time when client demand won't use it.
Hawthorne: Media buying agencies are playing both sides of the fence. They may have lost some client base that helped hold larger media packages on high profile cable networks. In an effort to help hold media, they have started selling their time to other agencies, brokers and/or reps. Many agencies are more than willing to buy "pre-owned" time from smaller companies. However, those same agencies would avoid buying the same time at the same rate from one of their major competitors.
Knight: There are some companies playing both sides of the fence. The pitfalls are loss of control, accountability and, most importantly, revenue.
Koeppel: There are some, and it's frowned upon. We are seeing avails being released from a station and, a short time later, a broker/agency will cut and paste those avails on their letterhead and send them out as their own time. It can become a nuisance and a waste of time dealing with these types of intermediaries.
Savage: There are media agencies playing both sides of the fence. Most agencies that do both, however, are viewed as brokers first and foremost.
Stacey: There are some, but when they are buying or brokering, they are dealing with different clients. When they are buying, they are purchasing for the current clients that they deal with and have contracts with. When they are brokering, they are trying to sell times that do not work with the current list of clients that they have.
Yallen: There are a large number of agencies that act as brokers and agencies in several different capacities — some to simply move time they cannot use. Some broker in order to stay incumbent. It is another revenue stream. A major pitfall here is that a broker that is playing both sides of the fence can hold all of the favorable time periods for their in-house clients.
Some cable networks require an official "agency of record" to buy airtime. Is this an effort to combat too many brokers from reselling their time? If so, what is the upside for the networks — do they lose money and/or measurability of available time if too many brokers are involved?
Eden: The networks are making an effort to regulate the rates being charged for their stations. As many brokers are not full-disclosure, the stations have no idea what the brokers/resellers are charging.
Fays: MTVN does adhere to an AOR policy. Our long-form clients were tired of paying broker mark-ups and frustrated at not having a direct line to a network representative.
Hawthorne: There are stations and networks that require not only an AOR to buy their time, but require the name of the client you are going to air. This is definitely to discourage brokers from buying up blocks of time and reselling it to clients who may just buy directly from the station. The AOR networks are well known in the industry: A&E, ABC Family, Biography, Comedy Central, CMT, Discovery, FX, HGTV, History, Lifetime, National Geographic, TLC, Travel — among others.
Lee: Many of the cable networks instituted an AOR policy — this is a good thing because it keeps media rates consistent. I have not heard of any broadcast stations having an AOR policy.