Pricing of advertising by ack15378

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									                                             APPENDIX 4.3
   (referred to in paragraphs 2.85, 2.86, 4.34, 4.59, 4.60, 4.96, 4.110, 4.117, 4.124, 4.128 and 4.131)


                                     Pricing of TV advertising

    1. TV advertising prices are generally arrived at through negotiations between media-buying agen-
cies, which act on behalf of the advertisers, and sales houses, which act on behalf of the broadcasters.
The degree of involvement of the advertisers varies, and a few large ones carry out much of their own
negotiating and media buying without using an agency.

    2. All sales houses publish rate cards, as required by the ITC. However, both Granada and the IPA
told us that because the rate card is unable to take account of fluctuations in demand, it is not often used
in practice. Granada told us that the main purpose of publishing rate cards was to make the standard
terms and conditions of each sales house publicly available. However, as contract terms vary for each
advertiser, the rate card has little, if any, effect as a means of introducing transparency into the market.

    3. The SAP of the broadcaster is the most widely-used basis of negotiation (see paragraphs 11 to 19):
essentially, it is a notional benchmark price, which differs across regions and according to the demo-
graphics of the audience that the advertiser wishes to reach. The SAP varies on a month-to-month basis
depending on the ratings achieved by the broadcaster, and the amount of revenue received by the sales
house from advertisers. However, advertising expenditure commitments are influenced in turn by adver-
tisers’ expectations of what the SAP will be, as this will determine how much they need to spend to
achieve their target level of ratings.

    4. All three ITV sales houses sell the vast majority of their airtime on the basis of the SAP, and
pricing practices are very similar across the three. Channel 4 quotes prices for delivering a certain num-
ber of ‘impacts’ within revenue bands linked to ITV SAPs; while Channel 5 and pay-TV channels quote
prices derived directly from ITV SAPs, normally at a discount. As a result, the actual prices charged by
other TV channels follow the average ITV price.

    5. Ratings achieved against the main demographic groups by individual TV programmes are esti-
mated by the Broadcasters’ Audience Research Board Ltd (BARB, jointly owned by the ITV companies,
the BBC, C4, C5, Flextech and the IPA), which bases its measurements on a sample of around 4,000 UK
homes. The ITV sales houses sell airtime on the basis of the following demographic groups (or target
audiences):

            Adults
            ABC1 adults
            16–24 adults
            16–34 adults
            Men
            ABC1 men
            16–34 men

            Women
            ABC1 women
            16–34 women

            Housewives
            ABC1 housewives
            16–44 housewives
            Housewives with children

            Children


    6. A housewife is defined as the main grocery shopper in each household, with one assigned to each
TV home (over 10 per cent of ‘housewives’ are male). Channel 4 sells airtime on the basis of the above
groups, and also a number of more specialized target audiences. Billetts, a media auditor, has estimated
that one-third of airtime is sold against ‘broad’ audiences (adults, housewives, men, women, children),
while two-thirds is sold against audiences which are more narrowly defined by social class or by age.

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    7. The level of the SAP depends in part on the level of impacts/ratings the broadcaster can achieve.
An impact is a single viewing of an advertisement by a member of the target audience. Ratings, or TVRs,
are the number of impacts achieved (by an individual advertising spot, or aggregated over a specified
time period or an entire advertising campaign) expressed as a percentage of the target audience (1 TVR =
1 per cent of the target audience). For example, if the target audience is housewives, a spot during an
episode of Coronation Street on a Monday may achieve ratings of 25 housewife TVRs. If a spot on the
same programme on a Wednesday achieves a further 20 housewife TVRs, then a total of 45 housewife
TVRs has been achieved by the two spots, regardless of the likely high level of duplication of viewers
watching both episodes. Because impacts are measured in thousands, the SAP is also known as the CPT.

    8. The actual ratings achieved against each demographic group, by each advertising spot, are meas-
ured by BARB, and published by MMS (Media Monitoring Services) and others. Advertisers commonly
employ ‘media auditors’ to check that the required coverage is achieved by their media buyers as accu-
rately and efficiently as possible. The IPA told us that 85 per cent of all TV advertising expenditure is
audited in this way.

    9. The most common length of an advertisement is 30 seconds, but advertisements of 10, 20, 40 and
60 seconds are also frequently used, while advertisements with a different duration to these can also be
shown. The rate cards of the sales houses indicate the standard price relationship between spots of differ-
ent lengths. For example, the price of a 10 second spot may be 60 per cent of the price of a 30 second
spot.

    10. In the calculation of SAP, the ratings of a spot that is more or less than 30 seconds may be con-
verted to ‘30 second equivalent’ spots by weighting them according to their rate card price, relative to
that of a 30 second spot. For example, if a 10 second spot achieves 25 housewife TVRs, and the rate card
price of a 10 second slot is 60 per cent of that of a 30 second spot, the spot will have achieved 25 ×
0.60 = 15 TVRs on a 30 second rate card weighted basis. Alternatively ratings may simply be weighted
according to their duration relative to a 30 second spot—for example, ratings for a 10 second spot would
be divided by three as the spot is one-third of the length. Discounts offered by sales houses to advertisers
may be based on the ‘pure’ SAP (derived using rate card weighted TVRs) or on duration-weighted
station average price.


Calculation of station average price
    11. An advertiser commits expenditure to the sales house ‘against’ a particular target audience, ie the
return on that expenditure will be measured in terms of the number of ratings of that target audience
delivered. The SAP for a target audience, for example, housewives, which is the basis of discounts
offered to advertisers, is calculated as:

                  SAP (housewives) = Total revenue received (all target audiences)
                                             Total housewives impacts

    12. Total housewives impacts include impacts from advertising spots which are seen by housewives,
but in which the advertiser buying those spots is not paying for housewives impacts, but for impacts
achieved against some other target group. For example, some housewives may watch football matches,
but advertisers paying for spots during football matches are more likely to be targeting ABC1 men.

    13. Having estimated the SAP for the target audience, the sales house attempts to place the advertise-
ments efficiently (reaching as many of the target audience as possible but as few other viewers as poss-
ible) in order to achieve the agreed ratings. The realized price, for a given series of spots, to an advertiser
targeting housewives is calculated as:

                  Realized price =      Individual advertiser’s expenditure
                                     Housewives impacts achieved by those spots

   14. In essence, the SAP for a given target audience is not a true average: it is the price that would
apply if all advertising spend, by every advertiser, was made against that audience, and each spot was
valued by its ability to deliver that audience and no other. Discounts can be achieved on behalf of the
majority of advertisers by the tactical placing of advertisements where they will deliver the target
audience more efficiently. The sales house can therefore sell at an overall net discount to the SAP.


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    15. An illustration of the way in which all advertisers could in theory receive a discount on the SAP
is shown in Table 1. In this example the station has only three advertising breaks over the period for
which the station average price is calculated, and each of these breaks is of sufficient length to show one
advertisement. Three advertisers wish to purchase spots on the channel over the period. The first has a
target audience of adults, the second of ABC1 men, and the third of 16–24 adults. Each commits £10,000
of advertising to the station over the period—a total of £30,000.

    16. Break A is seen by 25 per cent of adults, 5 per cent of ABC1 men, and 10 per cent of 16–24
adults, or in other words it achieves 25 adult TVRs, 5 ABC1 men TVRs and 10 16–24 adult TVRs.
While Break A achieves 25 adult TVRs, Break B achieves only 5 and Break C only 10—a total of 40
adult TVRs across all three breaks. So if all three breaks were purchased on the basis of adult TVRs a
total of 40 adult TVRs would be achieved over the period.

    17. The ‘universe’ is the actual number of individuals within the target audience. In this example, the
adults universe is 12,777; of whom 2,536 are ABC1 men and 1,771 are 16–24 adults. An impact occurs
when an advertisement is seen by one member of the target audience (although impacts are in practice
measured in thousands). As 40 adult TVRs were achieved over the three breaks, 40 per cent of the adults
universe watched an advertisement (ignoring duplication), so the number of adult impacts is 40 per cent
of 12,777 or 5,110. The SAP for adults, then, is the total revenue for the period (£30,000) divided by the
number of adult impacts achieved (5,110). Similarly, the ABC1 men SAP is £30,000 divided by the
number of ABC1 men impacts, and the 16–24 adults SAP is £30,000 divided by the number of 16–24
adult impacts.

    18. If the first advertiser’s spot were placed in Break A, it would achieve 25 adult TVRs, or 3,194
impacts (25 per cent of the adult universe of 12,777), at a cost of £10,000. This is equivalent to an aver-
age price of £3.13 (£10,000÷3,194), a discount of 47 per cent on the adults SAP of £5.87. However, if
the first advertiser had been given a spot in Break B rather than Break A, only 638 adult impacts would
have been achieved (5 per cent of 12,777) at an average price of £15.65, a 166 per cent premium on the
adults SAP. However, although Break B is seen by only 5 per cent of adults, a large proportion of these
are aged 16–24. In fact it is seen by 25 per cent of 16–24 adults. The 16–24 adults SAP, at £42.35, is
higher than the adults SAP, because there is a smaller universe of the former. But in Break B the realized
price for 16–24 adults is £22.59, again a discount of 47 per cent on the 16–24 adults SAP of £42.35.
Likewise the greatest discount for ABC men can be achieved by advertising to this group during
Break C.

TABLE 1 Airtime optimization

Advertiser          Target audience       Budgets committed

    1               Adults                         10,000
    2               ABC1 men                       10,000
    3               16–24 adults                   10,000
                                                   30,000
                                                                       per cent
Break                                        TVRs
                        Adults             ABC1 men             16–24 adults

    A                    25                    5                  10
    B                     5                   10                  25
    C                    10                   25                   5
Total                    40                   40                  40

Universe             12,777                2,536               1,771
Impacts               5,110                1,014                 708
Station price         £5.87               £29.57              £42.35

                        Adults            ABC1 men              16–24 adults
Break A                  £3.13            £78.86                  £56.47
                        (–47%)            (167%)                   (33%)

Break B                 £15.65            £39.43                  £22.59
                        (166%)             (33%)                  (–47%)

Break C                 £7.83              £15.77                 £112.93
                       (033%)              (–47%)                  (167%)

 Source: Granada.




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   19. Both SAPs and realized prices are based on advertising expenditure, which includes a standard
15 per cent commission payable to the media buyer by the advertiser. The media buyer receives this
commission based on the amount invoiced but, in practice, most of this commission is returned to the
advertiser as a rebate, so that in effect the media buyer’s commission is around 3.5 to 4 per cent of the
amount invoiced by the sales house. The 15 per cent commission became standard at a time when the
media buying function was usually performed by a full-service advertising agency which commanded a
higher level of remuneration for its services than a specialized media buyer.


Share deals
    20. The sales house and the media buyer/advertiser will generally negotiate, on a one- to three-year
basis, the proportion of its advertising budget which the advertiser/media buyer will place with that sales
house (a ‘share deal’). Although separate advertising campaigns are arranged for each of the advertiser’s
brands, a single share deal is usually made for the advertiser’s total budget (or in some cases for the total
budget of the media buyer). In return for making this commitment, against a specified target audience or
audiences, the advertiser is guaranteed a set discount (or premium) on the relevant region’s SAPs for
those audiences. Its expected advertising spend will also have a considerable influence on the level of
discount it can obtain. Although there are detailed published data on TV ratings and pre-discount prices,
discounts offered to advertisers are highly confidential, and vary widely depending on the negotiating
strength and ability of the sales house, relative to that of the advertiser or media buyer. Sales houses have
some discretion to offer a smaller discount, or charge a premium, to advertisers who they judge to be less
price elastic, or those whose media buyers are less well able to negotiate. This discretion is, however,
limited by the presence of media buyers with knowledge of the discounts achieved by a wide range of
their clients, and by the widespread use of media auditors to monitor the cost of advertising.

    21. Share deals are usually negotiated for a minimum of one year. The IPA told us that most are
agreed in the fourth quarter, for the calendar year ahead. However, the ISBA told us that the negotiation
of share deals was a ‘robust debate’ which could go on for several months. Procter & Gamble told us that
it has, in the past, continued negotiations into January even though this meant none of its products being
on air for a period of time.

    22. There are several ways in which the discount (and therefore net price) achieved may be lower (or
higher) than planned. One is that the programmes on which the advertisements are placed achieve higher
than expected ratings, thereby reducing the realized price relative to the SAP for that audience. SAP will
also be reduced due to the increase in ratings, but to a lesser extent than realized price, unless the ratings
for that target audience increase uniformly across all programmes. More importantly, an increase in
expenditure committed by another advertiser would increase the SAP for any given target audience. Such
an increase in expenditure would raise the overall revenue of the sales house for the period and thus the
SAP and the actual price for each advertiser. Thus, the increase in expenditure effectively increases the
price of ratings, so the advertiser may need to commit to a larger level of expenditure in that month, or in
the following month in order to achieve the required level of ratings.

    23. A share deal with an ITV sales house will often include a commitment by the advertiser/media
buyer that a minimum proportion of its TV advertising budget will be spent with ITV as a whole. For
example, Granada told us that 45 per cent of its deals contain an ‘ITV share of broadcast’ clause (which
it said it regarded as a way of guaranteeing its own share, rather than protecting the share of its ITV
competitors). If the sales house is one of the two which represent a London region (Carlton or
LWT/GMS) the advertiser/buyer will generally commit to the minimum proportion of its spending on
ITV which will be spent in London, and make an additional commitment that a proportion of its spend-
ing in London will go to the sales house in question (ie Carlton Sales will attempt to secure majority
spending for the Carlton franchise, and GMS will attempt to do so for LWT). Finally the advertiser will
normally be requested to commit a share of its spend on ITV to each of the regions represented by the
sales house, or to a group of these regions together (called a ‘macro’ region). The IPA told us that an
advertiser who did not wish to place advertising on one region represented by a sales house would expect
to receive substantially poorer terms from that sales house. Both Granada and BSkyB (as an advertiser on
ITV) have provided us with copies of annual agreements which included commitments to ITV share of
TV, London ITV share of ITV, Carlton or LWT shares of London, and other individual regions’ shares
of ITV.

   24. The IPA told us that all three ITV sales houses introduced ‘ITV share of TV NAR’ clauses into
share deals in 1997 (for 1998 agreements), as an attempt to counter the increasing competitive threat, to


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ITV as a whole, from other channels. Granada told us that the focus of its sales effort changed in
1997/98, from competing against other ITV regions only, to also competing against other TV channels. It
added, however, that the main change in its sales policy in 1997/98 was to negotiate deals based on the
Granada regions’ share of all broadcasting expenditure, rather than their share of expenditure on ITV.

    25. The importance to the ITV sales houses of securing shares of ITV revenue through the use of
share deals may itself be an indicator of the potential for competition between the ITV regions. Billetts
told us that although the ITV sales houses now tend to focus as much competitive activity on other TV
channels as on one another, this was not the case until a few years ago, when their focus was more on
each other than on other channels. Granada told us that until two years ago all sales effort was aimed at
maximizing share of ITV. In our view, however, the existence of share deals may limit switching
between ITV regions during the period of the deal.

    26. As regards the structure of discounts offered to advertisers, the IPA (and also several media buy-
ers) told us that discounts offered by ITV sales houses were such that any attempt by an advertiser to
reduce its level of ‘support’ of that sales house would result in a marked reduction in the advertiser’s
level of discount. However, an increase in revenue allocated to a sales house would, it said, result in a
proportionally smaller increase in the level of discount offered.


Implementation of share deals
    27. The media buyer agrees its TV advertising objectives with its client (the advertiser). These will
generally be specific targets for coverage (proportion of the target audience seeing the advertisement)
and frequency (proportion of the target audience seeing the advertisement a certain number of times), or
maximum coverage at a particular frequency level, in a given month or over a campaign. For example,
an advertiser may estimate that a viewer will need to see the advertisement three times before responding
to it, for example, by buying the product advertised. The required frequency is likely to be higher for
more expensive products (for example, cars) or those with which the target audience is unfamiliar (for
example, online banking). The advertiser may also require most of the impacts to be delivered close to
the time of the purchase decision.

    28. Having agreed the level of ratings that will deliver the required coverage and frequency (for
example, 400 adult TVRs nationally over four weeks), the media buyer will attempt to achieve this level
of ratings as efficiently as possible. If, as in the example given, a high level of ratings is needed over a
short timescale, the media buyer may have no alternative to using ITV, due to its unique ability to build
coverage quickly. MediaCom TMB, a media buyer, told us that in a recent campaign its objective was to
maximize the number of people seeing the advertisement four to six times. In fact, the entire budget was
spent on ITV, and 27 per cent of the audience saw the advertisement four to six times. An optimum strat-
egy using other channels but not ITV would have reached only 19 per cent of the audience at the required
frequency.

    29. Granada told us that media buyers attempt to achieve a uniform level of ratings across all
regions, although expenditure may nevertheless be shifted between regions, particularly towards those
regions with low ratings. In the same context, the IPA told us that media buyers/advertisers are more
likely to compare the level of value being achieved in each region, which depends on the price of adver-
tising and the consumer sales response to that advertising, and try to achieve equal value across regions
rather than equal ratings.

    30. A sales house will produce estimates of what the SAP will be in a given month, based on its
expectations of demand for advertising, and level of viewing, in that month. It will generally reach an
increasingly accurate estimate as the month approaches and as actual spending commitments are made
by advertisers/media buyers.

    31. The media buyer, for its part, estimates how much expenditure will be necessary to achieve the
required level of ratings in the month. It then commits this level of expenditure to the sales house. Some
advertisers/media buyers will make this commitment several months in advance while others, for exam-
ple, those needing to respond to a specific event or to an increase in advertising by their competitors, will
generally pay a premium to have their advertising aired at very short notice. As a result, the sales house
will not know its precise revenue for a given month until the end of that month. Nor will the number of
impacts delivered within each target demographic be known until the end of the month, so it is only then
that the SAP can be calculated accurately.


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    32. Additionally, while the media buyer can forecast approximate revenues for the sales house over
the period, and can therefore estimate SAP, it does not know the level of expenditure that has already
been committed to the sales house by advertisers other than its own clients. The sales house knows how
much expenditure has been committed. It uses its information to estimate what additional revenues may
be expected and, based on this, it arrives at the expected SAP which is quoted to the media buyer, and
which the media buyer uses to determine how much expenditure it must commit. The IPA told us that
ITV sales houses have freedom to move the SAP up or down by up to 4 per cent in a given period. It said
that all three had forecast a considerable increase in expenditure for June 1998 (the World Cup). On that
occasion the predicted increase in SAP was so great that many advertisers reduced their advertising in
that month, with the result that actual SAPs were somewhat lower than the sales houses had estimated.
Carlton told us that this was extremely unusual (and therefore difficult to predict) and occurred because
the distortion in the schedule caused by the football (and to anticipated levels of audiences) led to greater
than expected numbers of consumer product manufacturers switching advertising between months.

    33. The amount of airtime used to broadcast advertising by ITV licensees—a proxy measure of
supply—is limited to a daily average of 7 minutes per hour of broadcasting. Between 6 pm and 11 pm,
the maximum average is 7½ minutes an hour, and in any one clock-hour the maximum is 12 minutes of
advertising (see Appendix 4.2). More generally, however, the supply of advertising (in terms of both
audience size and demographic structure) also depends on the number and type of impacts achieved,
which are largely determined by the choice of TV programming and scheduling. For ITV, the ITV
Network Centre (see Appendix 4.5) is responsible for commissioning and scheduling the programmes to
be shown, and its decisions are largely driven by the desire to maximize audience levels and ultimately
advertising revenues. Hence, it will generally seek to commission programmes that appeal to the higher-
valued target audiences (within ITC constraints), and to schedule them at a time when those audiences
are likely to be watching TV. We note also that the ISBA has recently criticized ITV for concentrating its
investment in programming on peak times and allowing the quality of daytime programmes, and there-
fore daytime ratings, to decline. Additionally, the recent decision by ITV to remove News at Ten from its
schedule, and replace it with news programmes at 6.30 pm and 11 pm, was largely driven by the desire to
maximize advertising revenue in peak times, and this strategy appears to have had some success.

    34. While ITV as a whole may be able to influence its overall supply of audiences, over the medium
term, by the allocation and size of its spending on production, there is also scope for individual sales
houses to vary/optimize the supply of ratings delivered against specific demographic groups. For exam-
ple, if the demand for ratings against 16–24 adults increases relative to other target audiences, the sales
house can choose to sell a particular spot on the basis of 16–24 adults rather than on the basis of any
other. Alternatively it can move advertising airtime from one programme to another, within the ITC
restrictions, in order to achieve more ratings against a particular target market.

    35. Besides responding to changes in demand for a given target audience by varying its supply of
that audience, ITV may have some scope to restrict supply overall, in an attempt to force up prices. ITV
attempted to do this in the 1980s by not using all of the advertising minutage allowed to it, although this
is now prohibited by the ITC. Carlton told us that ITV was a monopoly when this occurred, but that it
now has no incentive to restrict airtime as advertisers would be able to switch to other networks. Another
method by which a broadcaster could restrict supply of airtime, and therefore of ratings, is by using air-
time to advertise its own products or services. By purchasing airtime for itself the sales house increases
the level of demand for ratings over the period, and therefore the price.

    36. Some potential may also exist for sales houses to charge high transfer prices for advertising their
own products, so as to inflate the SAP. The ISBA told us that it was concerned with the owners of the
ITV sales houses using them excessively and unreasonably to support their own brands. It said that
advertising of ONdigital was the prime example of this, and that it had the effect of creating unnaturally
inflated airtime prices for all other advertisers. Carlton told us that this was not feasible because its
advertising of its own products was marginal (around 4 per cent of revenue), and because transfer pricing
was regulated by the ITC (but see also Appendix 4.2, paragraph 23).

    37. ONdigital, which is owned by Carlton and Granada, is advertised almost exclusively in the ITV
regions owned by these two parties. Carlton and Granada told us that this was because the ONdigital
service was not widely available in the regions covered by TSMS, due to difficulties in receiving the
ONdigital transmission signal in these areas. ONdigital pays a premium for its advertising with Granada,
but Granada told us that the transaction was carried out through an independent media buyer (New PHD)
to ensure transparency, and that the higher prices paid by ONdigital were due to its higher than average

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concentration on peak time advertising. It also told us that the premiums charged to ONdigital were
based on those charged to BSkyB for advertising its digital satellite service, and that its intra-group spend
has been audited by the ITC.

    38. There are a number of other circumstances in which sales houses have some discretion to vary
their prices. Advertisers are set advanced booking deadline dates by which advertising must be booked.
A premium is charged for those failing to meet this date and this premium increases as the time of trans-
mission gets closer. Alternatively this can be presented as loss of advanced booking discounts. Carlton
told us that this practice was due to the cost of accommodating late bookings, in terms of rescheduling
breaks and a loss of freedom to ‘optimize’.

    39. The freedom to choose where an advertisement is placed in a break is also offered at a premium.
The first and last slots in a break are believed by some advertisers to trigger higher levels of sales
response than those in the middle of a break, and so command a higher price. The advertiser may also
wish to use a ‘top and tail’ (the first and last slots in a break) or place advertisements in centre breaks
(during a programme rather than at the beginning or end). Carlton told us that the higher price of such
services reflects the cost to the broadcaster in terms of lost ability to optimize. Advertisers may also wish
to avoid ‘clutter’ by ensuring that their product is not advertised in the same break as a similar product,
and again this is likely to be more expensive, although Carlton told us that it never mixed similar prod-
ucts in the same break. A further area in which sales houses have discretion in setting actual prices is the
selling of airtime on ‘specials’. Specials are events (usually in sport) for which advertising space is sold
on a spot by spot basis, usually at a significant premium, and to established customers. The IPA told us
that each ITV sales house can decide which programmes are ‘specials’ independently of the other two,
and that on average across ITV, one programme a week is nominated as a special (though UNM told us
that these account for only 3 per cent of its advertising revenue). The majority of advertisers’ share deals
did not specify the price of specials, so sales houses had freedom to vary (subject to negotiation) the
premium charged, which varied from around 25 to 75 per cent on the SAP, depending on the event in
question.

    40. Annual agreements generally specify the proportion of the ratings that will be achieved in differ-
ent dayparts, to ensure that the sales house sells all available advertising space, including the less popular
daytime spots as well as peak spots. In effect different day-parts are bundled together, and the adver-
tiser/media buyer will pay a premium if it wishes to impose daypart restrictions (for example, requiring
that all advertisements for the product be shown at peak time). Advertising tends to be more effective
when it is seen immediately prior to purchase, so advertising between Thursday and Saturday, aimed at
weekend purchases, is likely to be sold at a higher price.

    41. Some of the additional charges discussed, such as those relating to advanced booking deadlines,
may be charged at standard rates to all customers. However, others will be at the discretion of the sales
house and will depend in practice on the bargaining power of the advertiser/media buyer. Carlton and
UNM told us that they saw the advertising industry as being characterized by a high level of buyer con-
centration. Zenith Media, the largest of the media buyers, told us that all its customers benefited to some
extent from its size. However, we note that media buyers are less concentrated than the ITV sales houses
(the top ten buyers accounting for around 62 per cent of the market, according to the IPA). Share deals
may be negotiated on the basis of the expenditure of the individual advertiser, or on the aggregate spend
of its agency. The IPA told us that negotiating strength largely depended on the size of the individual
advertiser. As media buyers were paid a commission based on the advertiser’s expenditure, they might
benefit from media inflation, and it was not necessarily in their commercial interests to work together to
resist this inflation. That said, each had regard to its relative performance on behalf of its clients, which
was measured by external consultants, and Carlton told us that there was fierce competition between
them for the business of advertisers.




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