Walden: TVNZ move gifts Aussies upper hand
Andy Blood (L) and David Walden
TVNZ’s proposed cut to agency commissions will shift power and creative leadership to Australia, warns CAANZ president David Walden.
“We have for a long time punched above our weight in attracting top talent like Andy Blood, Nick Worthington, Toby Talbot and others. That’s why we have such a strong creative reputation.
“But the knock-on affect of this move will be to reduce overall budgets, especially for creative work.”
TVNZ yesterday announced the results of a review into agency remuneration. The proposal to halve media commissions to 10 per cent, in January 2011, was met with swift response by industry bodies.
Most critical of the TVNZ decision is CAANZ, representing the bulk of Kiwi ad agencies.
TVNZ points out that the change simply aligns New Zealand with Australia, where commissions have been at 10 per cent for many years.
“But the problem with that is a simple exercise in economics,” lectures Professor Walden. “It goes like this:
“Let’s say a client has $1 million for advertising. In theory $200,000 of that will be paid back to the client who will then spend, say, $100,000 on creative work, $50,000 on media placement, $30,000 on account maintenance and the balance retained as a rebate.
“In Australia, the equivalent media spend will be $4 million. So even though the commission is 10 per cent, the total sum for the agencies is $400,000. Now the cost of creative talent and production are pretty much the same in New Zealand and Australia.
“So tell me, who can afford to pay more to create great work and attract top talent?
“Cut that commission by half and suddenly everyone has to work for even less. How can an agency afford to hire someone like Tony Talbot for $500,000 a year?”
Walden is hopeful that other media won’t follow TVNZ’s lead.
TV3’s Roger Beaumont says the broadcaster is watching with interest and “will work with the industry on whatever way we go”.
Walden throws the challenge the other way.
“If you were a media owner, wouldn’t it make sense to now say, ‘Tell you what, TVNZ have just paid you half, I’ll pay you an even greater commission, but only if you spend your clients’ money with us.’ Now that’s a smart strategy for you, Vincent.”
Thanks for the tip, Devo.
Boyd Wason
September 25, 2009
Hey Devo – If you think you’re clients aren’t giving you enough budget send more of them our way. Tango have been getting great results with small budgets using digital channels for 7 years. I commend TVNZ for having the balls to do something to level the media playing field for all agencies.
Glenda Wynyard
September 25, 2009
I don’t want to take this on by myself, but as a media professional, there is no way I would recommend one media owner over another based on who paid us a greater media commission.
Our clients set our remuneration levels (in agreement with our company) and as long as this isn’t a way for the media to inflict an inappropriate rate increase, we all have quite a length of time to move ahead to alter any such commission based trading agreements we may have in place that fall outside of the 10% commission level to be paid.
The dynamics of our industry is changing and we need to evlove with the times. This is one of those inevitable changes that has long been mooted.
David MacGregor
September 25, 2009
This may sound bleeding obvious, but why not charge clients for the virtuoso talents of Blood, Talbot and Worthington at a rate the market will pay. It has long bugged me that agencies have been giving ideas away for free for years in return for media commissions.
Come to think of it $500k would buy 4 decent creative people (at least) and leave change for training and development – oh, that’s right agencies don’t invest in creative people, growth by acquisition/importing Poms is so much easier…500k for a CD, exploit the ‘interns’…
CAANZ’s whining is very retro, but times have changed – get over it and adapt/get smarter.
Vincent Heeringa
September 25, 2009
Because, and let’s be honest, Kiwis aren’t prepared to pay. Not even for you, Big Mac. Devo is trying to protect a fat-laden system that if it were brough back to market realities would mean we’d all be reduced to watching Jude Dobson flogging Anusol cream. Noooooo…
Boyd Wason
September 25, 2009
Vincent you’re right when you talk about protecting a fat-laden system, but I think you’re not giving enough credit to Kiwi talent and the smart stuff that’s being produced by the growing number of indies – take for example Sugar and their win of BNZ.
Jules Brown
September 26, 2009
I think David McGregor hit the nail on the head. Media commission is for placing media. Creative charges are for creative talent. Good companies will be willing to pay market value for good creative talent. 10% media commission works fine pretty much everywhere else on the planet, so why not NZ too?
Jules
David Sheppard
September 27, 2009
Here’s what could happen, David: Andy, Nick and Toby could work just as hard for a little less for a while. C’est la guerre.