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Political umbrella for major media in return for support for possible early elections

07 August 2014 / 20:08:56  GRReporter
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This was actually a self-regulation of the market in order to avoid sharing the spending on advertising between 5-6 companies. Their job was to ensure greater discounts and favourable payment methods for customers of advertising agencies while increasing the volume and the number of companies that advertised in the media. To understand the size, to make a TV ad through direct negotiations with a nationwide television medium, an advertiser should have a budget of at least 250,000 euro whereas, through a media shop, even companies with a budget of 50,000 euro or less could have access to TV advertisements, even in prime time. So at the beginning of each year, media shops calculated the budget of all their customers and traded better prices for ads with the media. That was, by the way, the reason for which media shops were created. Now that the trading and pricing will be done directly between the media and the advertiser this facility will seize. So, for example, small advertisers will not have power and, of course, when we talk about government advertising, we talk about an increasing lack of transparency between media and advertisers...

As for the remuneration of media shops one part of it was always covered by the advertiser, as a total management fee for the promotional programme and the other part by the media through rebates in kind (advertising time) that did not exceed a value of 9.9% of the total invoiced budget. This maximum rebate was legislated and operative after 1995 (!) as well as the obligation of the media to have a copy of the invoice issued to the media shop and to the advertiser!

At the same time of course, media shops and advertising companies assumed the risk of paying (prepaying many times!) the media for the advertising time purchased and the risk of financing their client’s postponed payments, even regarding taxes! In this sense, one can say that the new law favours the advertising market, and this would have been so if the state simply did its job, i.e. if it checked that the rules on trade were respected by all. Here, however, the state simply intervenes and abolishes...

As I said before, if there was non-transparency somewhere it was in the way the state itself managed its money spent on advertising. The media shop was required to study a number of performance data for the media (e.g. circulation or viewership) and accordingly propose. However this was not the case when the state itself made the deal: we saw in the past that a newspaper with a circulation of less than 2,000 copies per day (which mainly went to the offices of public corporations and organizations, i.e. again the state) was rewarded with government advertising amounting to several million euro when, according to market rules, it should have been excluded from any spending!

What will be the next day for the market? It is still early to predict, however this law will surely lead to further job losses in the advertising industry, in disciplines that are now prohibited by the state. There is a transitional period of one year for the law enforcement but this will hardly change anything. It is now time, as stated by the president of the Association of Advertising Agencies in a letter to its members, for the advertising market to learn to live with this decision and for the advertising agencies to focus on their core business and shine through it.

Perhaps this law is also a golden opportunity for marketers to accelerate the shift of advertising budgets from traditional media, whose effectiveness is difficult to measure, to digital media (internet, social media, personalised advertising) which is cheaper for the advertisers, more efficient and, most importantly, directly measurable in terms of their results!

 

Tags: MediaLawMergerMedia groupsPolitical interestsEarly electionsAdvertisinng market
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