Agencies hit by TVNZ commission reduction

Agencies and advertisers to be hit by TVNZ commission reduction

Media Release 24 September 2009
Communication Agencies Association of New Zealand

New Zealand advertising agencies and advertisers will be hit by TVNZ’s decision to reduce media commission from 20% to 10% from 1 January 2011.

The Communication Agencies Association of New Zealand (CAANZ) advised TVNZ today that its decision to reduce commission has been met with dismay from members and comes at a time when agencies and advertisers are under significant commercial pressure.

A recent poll of CAANZ members has highlighted that 80% of agencies will be adversely affected by TVNZ’s commission reduction.

CAANZ President David Walden said that whilst commissions are no longer the sole revenue source for agencies, they remain an important part of the agency-advertiser relationship. Most commissions are rebated back to advertisers who use the funds to help offset advertising costs.

“Agencies and advertisers will need an assurance from TVNZ that this reduction will also result in a reduction in airtime prices so that it is cost-neutral for advertisers. There is a feeling from members that over time TVNZ will increase prices to advertisers as rate cards are adjusted upwards.”

As a direct result of concerns around cost increases, CAANZ and the Association of New Zealand Advertisers (ANZA) have agreed to establish a reporting system to provide an objective assessment of television advertising costs over time.

TVNZ’s original proposal was for the commission reduction to take effect from 1 July 2010 but after consultation with CAANZ and ANZA TVNZ has agreed to delay implementation of the new rate until 1 January 2011 to allow agencies and advertisers time to adapt.

CAANZ acknowledges TVNZ’s assistance in producing a more workable timeframe, said Mr. Walden.

CAANZ will work closely with ANZA and TVNZ to assist agencies and advertisers through the transition by running workshops on best practice remuneration models.

“CAANZ members respect the prerogative of TVNZ to restructure its business and commercial terms. However, the New Zealand media industry is very competitive and TVNZ will need to weigh up any possible short-term benefits against the potential competitive response from other media owners.”

CAANZ member agencies collectively represent 90 percent of agency billings in New Zealand, with a combined annual turnover of approximately $1 billion.

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