Update on TVNZ Commission Changes

In my previous comment on this matter dated 1 October 2009 I noted that TVNZ had not formally made any announcement about a corresponding drop in rates to match the advised drop in media commission from 2011. In my absense on leave last week TVNZ did formally send a letter to agencies announcing that they would be making a drop in media rates that would neutralise the effect.

In theory this should provide comfort to advertisers that the cost effect of the commission reduction should now not be an issue. However having, in my time at TVNZ as Sales Director for a number of years, had responsiblity to deliver many a ratecard to the market I know that in practice it is possible to manage the pricing across the ratecard to drive small improvements in yield without too much visibility. We would expect TVNZ to plan subtle management of 2011 pricing strategy to achieve a small improvement in yield and gain some advantage from the commission reduction. It would not be to the extent of an overt "hold" of the benefit of the full reduction in commission.

So what does this mean? As 2011 ratecard comes to market evaluation of TVNZ's TV audience versus rate position will need to be interrogated extremely closely to look for any evidence of disproportionate increase in audience CPT's relative to audience and market demand trends.

At the end of the day we work in a demand driven market and whatever TVNZ does with its ratecard will be subject to what the market can bear. If the result of TVNZ's reduced commission sees ratecard pricing that delivers CPT increases that do not reflect its audience performance and demand in the market for its product they will struggle to secure any advantage by taking this action.

In the interim Carat's approach, as we work with clients business requirements, will be to investigate opportunities very closely with those media companies that have not at this stage indicated a reduction in commission. Where appropriate we will make recommendations that may see a shift in media investment in their favour. Ultimately of course performance objectives must take precadent and we would not recommend driving investment away from TVNZ if it is going to hurt the performance of client schedules.

There will also be a need, where appropriate, to discuss moving to fee based structures as an alternative to straight commission linked structures. As we enter 2010 agencies and clients throughout New Zealand will be engaging in such dialogue as a result of TVNZ's move.

Ultimately however we are confident in protecting best value for our clients through smart analysis, negotiation and trading regardless of TVNZ's move and will work in clients best interests as this progresses.