Sponsor (May-Aug 1957)

its have to pay for growing agency overhead id new services, whether they do so through commissions or fees, major ad agency executives told SPONSOR \\ tiile the 1 \ consent decree (two years ago) fired the flames, package >linw commissions have actually been attacked at various times throughout the t\ era. The main contention of admen leading the attack: "The agency's not producing; they're just picking the shows. \\ h\ should we shell out $300,000 a year to them on a $2 million show when the film's in the can by the time the agency sees it?" The fact that at least 13 big national advertisers don't pay package show commissions proves that their point has been carried with at least some of the major agencies. But SPONSOR found in talking to top agency presidents and radio-tv v.p.'s that there's no disposition to do anything drastic. Top agency management looks at it this way: • There's no overnight revolution PROF. FREY WILL REPORT 28 OCT. Commissioned 1>\ the \\A to conduct an uliji-ctiM study of agency compensation-. Prof. Albert Frej of Dartmouth is now compiling his material for the 28 October ANA meeting. In a memo to member agencies, I V's suggested that management replying to Prof. Frey's survey give it careful, serious thought. The study may reveal inroads into the commission system uncovered by the current W \ poll of 78 men. lecoming more widespread. Conclusions o ' ill influence future revis odifications in commissions. in the offing. Some modifications have obviously alread) been made in agency compensation. Clients are likely to continue bargaining for more and more services from their agencies, pressuring against fees when show commissions are sizable. The size of the account and its bargaining power will continue to dictate the pace. • As tv show control moves back from the networks to the agencies, some of the fire concerning show commissions may be diverted. "The commission system gets attacked periodicall) . At the peak of network control. tv happened to be the patsy." the president of one of the top 20 agencies told SPONSOR. • Rising cost of agency operation makes it unlikely that a mass elimination of all show commissions can come about. "The profit margin is slim and getting slimmer as it is," says the president of one of the top five agencies. "If you cut it down further, you just drive us out of business." Likely development: The agency that lets a client get out of talent commissions will try to make it up in service fees. • In the long run, agencies may evolve toward a fee rather than a commission system of compensation, but few admen see this change in the cards within the next two or three years. (And that includes client executives as well. I "Part of the problem is a confusion in the habits of the various media as it is." says the ad manager of a major appliance firm. "We can t buy time net. But when a show packager talks to us, he often quotes us a net price. The client is in the position of paying time and space commissions indirectly through the media, which is the traditional form he's used to. But he pays show commissions out of pocket and that hurts. Its really the same thing, but the second way makes us more aware of it." Actually the majority of advertisers apparentlx would prefer not to make am radical changes. They feel there are weaknesses in the commission s\ s tem but few reputable clients want to see it destroyed without some assurance that its replacement will really be more efficient. The very client (Bristol-Myers) whose director of advertising. Don Frost, helped touch off the thorough ANA investigation into the commission system, states it continues to pay package show commissions to its agencies. "We've continued to pay the 15%," Bays Bristol-Myers' Dick Van Xostrand. "As a companv we think we should. The 15' < s\stem has holes in it and it means different things from one agency to the next, but while it's the accepted practice, well abide b\ it." While this attitude is widespread among big clients, at the same time there's a feeling that the agency getting such a commission must do a great deal of extra servicing for the account — without charging fees. Top agency executives answer by saying clients should not look at agency commissions in terms of one medium versus another. "We take an over-all view of an account."' the executive v. p. of one of the top 10 agencies told SPONSOR. "If clients forced us into cost accounting by media through by-passing show commissions, we could no longer remain impartial in our advertising counsel. As it stands now, the practice among most agencies is to evaluate all media for each account to see whether the account on the whole is sufficiently profitable to be handled. Tv show commissions are just another part of the compensation necessary for the agency to operate at its high overhead." Whether clients pay agencies in commissions or retainers is immaterial. The form doesn't change the amount of money agencies must earn to operate efficienth . The core of the problem in the case of tv package shows is the fact that the work an agency does in selecting and supervising such shows is not as easily defined as it is in the case of an agency-produced show. '"This was particularly true a couple of years ago when network control of programing was at a peak. ' the president of one of the top 15 radio-tv agencies told SPONSOR. "We were operating in such a sellers' market at the time, that clients didn't see just how much work we had to put into sen icing their tv accounts. "But the pendulum has swung to SPONSOR .'■51 august 1957