Agencies and advertisers to be hit by TVNZ commission reduction from 20% to 10%
New Zealand advertising agencies and advertisers will be hit by TVNZ’s decision to reduce media commission from 20% to 10% from 1 January 2011.
The Communication Agencies Association of New Zealand (CAANZ) advised TVNZ today that its decision to reduce commission has been met with dismay from members and comes at a time when agencies and advertisers are under significant commercial pressure.
A recent poll of CAANZ members has highlighted that 80% of agencies will be adversely affected by TVNZ’s commission reduction.
CAANZ president David Walden (pictured) said that whilst commissions are no longer the sole revenue source for agencies, they remain an important part of the agency-advertiser relationship. Most commissions are rebated back to advertisers who use the funds to help offset advertising costs.
“Agencies and advertisers will need an assurance from TVNZ that this reduction will also result in a reduction in airtime prices so that it is cost-neutral for advertisers. There is a feeling from members that over time TVNZ will increase prices to advertisers as rate cards are adjusted upwards.”
As a direct result of concerns around cost increases, CAANZ and the Association of New Zealand Advertisers (ANZA) have agreed to establish a reporting system to provide an objective assessment of television advertising costs over time.
TVNZ’s original proposal was for the commission reduction to take effect from 1 July 2010 but after consultation with CAANZ and ANZA TVNZ has agreed to delay implementation of the new rate until 1 January 2011 to allow agencies and advertisers time to adapt.
CAANZ acknowledges TVNZ’s assistance in producing a more workable timeframe, said Walden.
CAANZ will work closely with ANZA and TVNZ to assist agencies and advertisers through the transition by running workshops on best practice remuneration models.
“CAANZ members respect the prerogative of TVNZ to restructure its business and commercial terms. However, the New Zealand media industry is very competitive and TVNZ will need to weigh up any possible short-term benefits against the potential competitive response from other media owners.”
CAANZ member agencies collectively represent 90 percent of agency billings in New Zealand, with a combined annual turnover of approximately $1 billion.
11 Comments
Why are you smiling Waldo? It ain’t no laughing matter!
mean pr shot
TVNZ dont deserve to have the ‘NZ’ part on the their name
Why should agencies get 20%? They do nothing for it other than hire a junior excel operator to fill in the holes from the last clients spread sheet.
After selling out on ideas for 10 years, agencies will be back selling creative as their core product. This is so funny. Communications ideas are king. Go back to what you do well. Agencies are not media companies – move on.
Good on TVNZ.
8.06.
Do you also have shit for brains? You certainly have verbal diarhoea.
And a dick for a head.
8.06am obviously doesn’t get how the system works, these days the commission gets past back to the client, loosing the 10% means they get 10% less of their budget coming back to them therefore to spend ( and pay for production costs),
You have to feel sorry for the clients as their is no way they can go and get an extra 10% from their bosses.
hence 10% down for the marketing budget and agencies to work with..
so cracker thinking TVNZ….its a major blow for the industry.
Everyone seems to be overlooking the fact that the commission rate is 15% and always has been. Five percent has been always added on for prompt payment. TVNZ, like other media, has benefitted from agencies paying them on time even on occasions when the agency has not been paid by the client.
That said, the commission system is archaic in today’s business climate. However the way TVNZ has approached a possible change is both clueless and a gross insult to the NZ advertising community (including advertisers).
For a start they (TVNZ) are putting their cash flow at risk – now there is no incentive for them to be paid by the 20th of the month. Agencies can now delay payment.
The NZ industry has always performed well and remained strong because all participants have worked together. TVNZ have now decided to act in a blatantly arbitrary manner against the interests of the wider industry. They (and the industry) will pay a big price for this.
Advertisers will end up paying the 10% cut. They won’t raise their TV budget by a similar amount. The most likely outcome is that they will adjust their budgets down and TVNZ will be hurt. How dumb can you be?
They have decided off their own back to cut agency income (from TVNZ media placement) effectively by half. How arrogant. Perhaps Rick Ellis should cut his income by half?
The commission system needs change and ad agencies need to get their heads out of the sand and recognise this.
But a smarter approach (by TVNZ and the wider industry) would have been to lower the commission rate by 1 or 2 points a year over time to allow for advertisers to adjust their budgets in a measured way. And it would have been a lot smarter to act in a collaborative manner. TVNZ through their actions have done the NZ ad industry a major disservice.
The biggest mistake of all though is that they have looked at agency commission as a cost to them rather than viewing it as an investment. An investment in a vibrant, creative and profitable industry of which they are a major beneficiary.
Ross
8:06 Sounds like you’re a bitter junior excel operator who fills in the holes from your last clients spread sheet.
Bless, and good luck to you.
Sounds like TVNZ have turned on a leaf blower to blow the smoke agencies create down the road. Good job. Ross why would agencies want to delay payment? 20th month or month following like the rest of the world. Incentives to get payment on time is dumb in the B2B space for large amounts. Fine on a power bill as it’s about small amounts and mass. Also if clients have to pay more – thats fine. That is half the problem with this industry. It’s too cheap!!!!
Waldo for Super City Mayor!
And now the real reason that TVNZ wants to rob its agency partners has been revealed…mismanagement of their own business. A drop of 90% in their annual profit.
That takes some explaining and agency commisions don’t even come close to explaining it.