As we progress through the uncertainty of altered advertising methodologies and marketing challenges, US International Media is confident that we are positioned to provide our clients with the best media planning and buying available. Why? Because our mandate has always been, and will always be, to treat clients as co-partners, not merely as sources of income. Logically, our advocacy of client rights spans the media buying experience, from all the little things we do for clients to getting the absolutely best rates for clients. So we were very pleased to learn recently that broadcasters and media agencies have reached agreements with ABC, CBS and NBC to phase out integration fees.
Artifacts of a bygone era
Many in the advertising industry view integration fees as artifacts of a bygone era, when ad insertion consisted of manually splicing commercial space into tape and certain make-ready costs imputed to the labor was justifiable. With the digitization of network feeds and the advent of digitized automated ad insert systems, labor expenses associated with inserting adverts have contracted substantially. As a result, many in the advertising business see integration fees as simply a way for the nets to extract additional revenue from the media buy, particularly given that the buy is not part of the unit price negotiation. Furthermore, there is a disconnect between the length of the commercial and the amount of the integration fee—one has no bearing on the other. In general, no other media charges advertisers to physically place schedules. [Editor's Note: Conde Nast and Hearst still charge 15 percent extra to bleed an ad to the edge of a page, another anachronistic charge that needs to be eliminated].
The above inconsistencies are compounded by the fact that non-network providers like cable and local TV stations, syndicators and nouveau networks such as Fox Broadcasting Company and The CW Television Network do not charge integration fees. Pressure from marketers, advertising agencies and industry representatives including the Association of National Advertisers and the American Association of Advertising Agencies upon ABC, CBS and NBC throughout 2008 to rationalize their continued implementation of integration fees emphasized the need for immediate change.
The nucleus of the problem is whether there remains a quantifiable cost to ad insertion given the advances in technology. All the networks use automated ad insertion systems, and have done so for over 20 years. Automated ad insertion systems are basically comprehensive, integrated systems consisting of storage devices (analog or digital), video stream compressors, computerized scheduling / management programs, distribution networks and switchers / splicers. These high-tech systems allow ads to be seamlessly and efficiently integrated into the audio / video feed automatically.
Accountability and transparency are key
Marketers are concerned with accountability and transparency, and see the hidden costs that agencies and advertisers incur from having to manage tracking and payment systems for integration fees as unnecessary burdens. According to TargetCast, the 2007 bill for integration fees advertisers paid totaled $125 million. Integration fees vary by daypart, market, and other factors, but approximated about $470 per prime and evening news unit (:30) and about $230 for each day and late night programming unit (:30). Maximizing the return on investment for each media buy is as important now as it ever was, given the current financial dislocations roiling the lending and securities industries, the drop in advertising spending, weakening consumer confidence, and so on. Furthermore, digital ad insertion technology has actually improved profitability throughout the network content supply chain, notably at the local broadcast / cable network level, where targeted digital ad insertion (essentially regional ad insertion) enables many local and cable operators to piggyback different ads in various geographical locations onto the same program. TV networks, affiliates, cable broadcasters and others in the “digital food chain” can maximize dollars expended.
ABC countered this argument by stressing how they would have to make up for the lost revenue elsewhere if the integration fee structure were abolished, and CBS explained the continued use of integration fees by asserting that they often receive nonconforming creative content from agencies, necessitating the network to contact agencies to “work through logistics, which requires additional time.” NBC offered no public explanation.
USIM is committed to continued client support
US International Media remains committed to delivering the best service possible to our clients. We stand behind every word in our Client Bill of Rights. We always put clients first, our integrated media plans are founded on state-of-the-art research, and we cultivate vendor relationships that result in preferential pricing and innovative added-value programs. To give clients the most complete service possible, USIM is structured around seven core competencies which provide the company with a competitive infrastructure. These seven core competencies are Media Planning, Spot Negotiation, National Media Negotiation, Print Negotiation, Out Of Home, U.S. Interactive and U.S. Multicultural Group. Our various services and specialist groups are organized to execute these core competencies. As the media pricing model continues to evolve, rest assured that we are active advocates of client rights across all dimensions of the media buying spectrum.
By Darrell Woody
Gazette Staff Writer