Advertisers Rankled By Network Fees

Agencies challenge Big 3 over $125M annual price tag to put ads on air

Major advertiser and ad agency associations are banding together to push ABC, CBS and NBC to reconsider $125 million a year in fees the networks charge them just for the privilege of buying time on their TV shows.

That's according a policy paper obtained by B&C. The American Association of Advertising Agencies (AAAA) and the Association of National Advertisers (ANA) plan to release the document at the ANA's 2008 TV forum Feb. 28 in New York.

The groups represent at least hundreds of millions of dollars in network TV spending. They include such big names as Procter & Gamble, Wal-Mart, Ford and Kraft, which say they are willing to meet with the networks to let them defend the so-called “integration fees” if they can.

“In today's environment, marketers are demanding accountability from their media investments and transparency in their relationships with media partners,” the statement says. “CEOs, CFOs, and procurement specialists are asking more questions than ever before about marketing expenditures and the impact on business results. Every dollar invested has to prove its worth. Given all this, it's only natural that marketers are again questioning the network integration fees charged by ABC, CBS, and NBC.”

The groups suggest a joint task force that would provide a forum for the networks to defend the practice. NBC, ABC and CBS declined to comment.

Advertisers say the fees are a byproduct of a bygone era, when someone actually had to physically insert ads into commercial breaks.

Executive VP Bill Duggan likens it to the movie Broadcast News. “There's a scene with someone running down a hallway to insert a tape in a machine,” he says. “That's kind of our understanding of why the so-called network integration fees existed once upon a time and that there was some kind of manual-labor charge for physically inserting the commercial into the program.”

The groups point out that newer networks like Fox and The CW do not charge the fees. Neither do the Television Bureau of Advertising's 500 local TV station members (including stations owned by ABC, CBS and NBC Universal) or the Cabletelevision Advertising Bureau's 75 members. A Fox source says that when the network launched, the decision was made not to charge the fees for competitive advantage because “in this day and age, there is no physical cost to integrate a commercial into the network feed.”

He says it's just a way to get a little more money out of the media buy since it is not part of the negotiation for the spot price.

“It's rather interesting,” says Duggan, “that only the legacy networks that have been around since the 1950s charge for these fees. None of the cable networks charge them, none of the newer networks charge them, syndicators don't charge them. None of the owned-and-operated stations of the major networks charge them. You can buy a spot on the 7 o'clock news on WNBC in New York and there is no integration fee, so why should there be an integration fee for a [NBC Nightly News] network spot at 6:30?”

No other media charges advertisers to physically place their schedules, the groups argue.

Duggan says that some of the big-ticket advertisers on network TV can be paying upward of $1 million in integration fees per year.

The fees vary by daypart, but average about $470 per spot in primetime and evening news and about $230 per unit in daytime and late night, say the advertisers, regardless of the length of the commercial. The AAAA and ANA are advising their members to raise the issue with the networks “at every opportunity.”

The policy statement makes their position clear: “Can network integration fees be rationalized? If not, let's make them go away and end this debate so advertisers, agencies, and networks can talk about other issues…like driving business results!”