Channel 4 contacts marketers over WPP row
Channel 4 has written directly to clients of the WPP media buying arm Group M in a bid to explain the consequences of the group’s stand off with the broadcaster over the terms of a new deal, which has resulted in Sir Martin Sorrell’s agencies pulling clients’ ads from its channels.
The row, which has been ongoing since December, is costing Channel 4 an estimated £20m in revenue a month and has seen the absence of major brands such as EE, Barclays, Kuoni, the Department of Health and BSkyB advertising on Channel 4 and UKTV’s portfolio in the lucrative opening to the first quarter of the year. Channel 4 has sold advertising on UKTV’s channels and websites since 2011.
Group M - which owns agencies including Mediacom, MEC, Maxus and Mindshare - is refusing to accept Channel 4’s proposed rates deal for 2013 and the length of the standoff means the ad freeze could continue into February, given ad booking lead times.
The agency group is understood to have developed contingency plans - such as booking extra slots on rival ITV - in a bid to ward off any negative effect the dispute could have on clients.
In the meantime, Channel 4 has written to Group M’s clients directly to explain what they may have been missing out on in terms of audience reach and return on investment by not advertising and to respond to some of the claims the agency group might have alleged about ad effectiveness - or lack of - across its portfolio.
The letters also point out that Channel 4 is a not-for-profit public service broadcaster, which reinvests ad spend back into programming rather than for commercial gain, which it hopes will persuade advertisers to back its stance in order to help safeguard the channel’s output.
One observer told Marketing Week the approach could be seen as a “political” move by the broadcaster because it could be interpreted Channel 4 is looking to forge more direct deals with clients rather than negotiate deals with media agencies. However, if this is the case, this is likely to be a short-term fix rather than a long-term solution from the broadcaster.
Some of the brands in receipt of the letter have told Marketing Week they are siding with their agencies over the conflict, although it is understood Channel 4 has arranged several one-to-one meetings with advertisers to discuss the negotiations over the coming weeks, which suggests a level of support on its side.
Both Channel 4 and Group M told Marketing Week negotiations are ongoing but did not offer further comment.
The row, thought to be the biggest ever stalemate between a media group and broadcaster in the UK, has resulted in a drop in Channel 4’s ad price - with the cost of a typical ad slot on the channel now about 30 per cent cheaper year on year, according to one media buyer, benefiting advertisers outside of Group M’s remit in the short term.
By contrast, ITV’s ad revenue for January is understood to be up 11 per cent year on year, meaning the station average price of an ad slot has also inflated.
While Channel 4 and Group M refuse to budge over the terms of their future ad deal, brands outside the WPP media buying roster are profiting from cheaper ad rates and last minute opportunities across the broadcaster’s portfolio.
Elsewhere, the fallout is nudging up ITV’s ad price and generally posing as a headache to anyone involved in the media buy – given the last minute rate fluctuations as the row rumbles on.
Channel 4 is losing out not just in terms of a sizeable revenue gap but also in terms of the perception of the channel, as the debacle has the potential to convince marketers its rates are over-inflated. On the other side of the coin, GroupM’s clients may well grow irritable as they itch to return to Channel 4 in time for its more popular programming such as One Born Every Minute and The Undateables.
Ultimately there are no real winners likely to emerge from this bitter dispute and the sooner the two parties reach an agreement the better in terms of stability for UK TV advertisers.