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.