Broadcasting Telecasting (Oct-Dec 1963)

Seller-buyer 'distrust' must be rectified There is an urgent need to improve advertiser-agency-broadcaster relations, David C. Stewart, president of Kenyon & Eckhardt, told a meeting of the International Radio & Television Society in New York last week. Mr. Stewart declared that a "growing distrust" has developed between advertisers and agencies and broadcasters. He said advertising executives recently have criticized "what they considered dreadful quality of TV programing, the clutter in network schedules and the inadequacies" of the National Association of Broadcasters code. The broadcasters, he said, have decried "the influence of the advertiser" in broadcast programing, implying that "advertisers and advertising were necessary, but essentially degrading, aspects of broadcasting." "We are facing a situation, which, unless corrected, can easily end by hurting all of us," Mr. Stewart asserted. "It will certainly hurt the country's national advertisers who use TV and radio, and since my first responsibility is toward K&E clients, my first concern is for them." He warned that this bilateral carping plays into the hands of "the power-hungry bureaucrats who simply want to crack the whip over radio and television." The inevitable result will be more rigid government controls over both advertising and broadcasting, he asserted. New Policy ■ Mr. Stewart called upon both advertising and broadcasting leaders to make strong efforts to understand the other's problems, and, in this connection, noted that K&E's Stewart K&E is implementing a new policy to help broadcasters regulate themselves. Under this procedure, the agency restricts radio-TV spot purchases, where practical and with client approval, to stations that sub scribe to the NAB codes or abide by equivalent rules. "We reached this decision after a careful study of codes and code operations in the top 50 TV markets and top 25 radio markets, and because we felt that it is to the best interests of advertisers and agencies to support the self-regulatory work of the broadcast industry," Mr. Stewart stated. "We are now in the midst of reviewing all spot schedules in line with this policy, and we have been discussing each one with the clients involved." He reported that K&E clients have expressed "great interest in our work, and in our principles and objectives," and said that there will be "positive results" soon. Mr. Stewart discussed another K&E policy development regarding broadcasting and the rating systems. He said K&E believes that an independent audit bureau, charged with auditing the internal practices of the ratings services, would be of "significant value" to both the advertising and broadcast industries. "We have drafted recommendations on the work and financing of such a continuing audit," he revealed," and have strongly urged the Advertising Research Foundation, of which we are a member, undertake the work. We have formally notified A. C. Nielsen Co. of our position, and are working with the other rating services." 15%, two for hourly rates, etc., one for fees to be negotiated in advance — and 87 don't mention the subject. For media research and other supporting services, the contracts are more specific: 45 say fees will be negotiated in advance, others specify six different bases for payment, and only six fail to mention the subject. 'Outside' Commercials ■ In the case of "outside" production of commercials, cost plus 17.65% or cost plus 15% is the most frequent agency compensation where one is specified, but 83 contracts do not specify. The cost-plus arrangement (cost plus either 17.65% or 15%) also is the most frequently specified compensation for the agency on packaged programs, facility charges, talent payments, and research, publicity and other supporting services when contracted for, but not done by, the agency. But in a majority of these cases, too, the compensation basis usually is unmentioned. "TV programing arrangements are by no means uniformly handled," the re port noted. "Combination time and program buys, separate buys, packaged shows, live programing, network origination, advertiser origination — these are all factors which tend to cloud interpretation of nonspecific contract provisions relating to agency compensation for production or programing services. "Under some circumstances the producer, station or network does not allow the agency a commission on the cost of the program, in which case the client is generally expected to pay the standard 15%. . . . The subject of talent residuals was rarely covered by the agreements. In the few instances noted, however, residuals were considered commissionable to the agency." Render Customary Services ■ The report said that about 10% of the 109 agreements "merely state that the agency will render all services customarily performed by modern advertising agencies." Of those more specific about what the agency is expected to do, 55 include mention of the creative preparation of broadcast commercials includ ing copy, script and story boards, and 1 1 specify the planning and creation or development of radio and TV programs. Investigating, recommending and contracting for media schedules are mentioned by 77, and checking affidavits and tear sheets by 53. Three call for the agency to establish its own monitoring service to audit radio and TV commercials. The study found 24 contracts that calls for compensation of the agencies by some special payment plan or fee arrangement rather than the traditional 15% media commission. The most common of these, found in 10 of the 24 contracts, gives the agency a guaranteed minimum commission; the advertiser makes up the difference if the agency's earned commissions fall short of the minimum; if earned commissions exceed the guarantee, the agency keeps the excess. ANA officials said the study was undertaken in response to members' queries about how various questions are handled in agency-advertiser contracts. 56 (BROADCAST ADVERTISING) BROADCASTING, November 18, 1963