Expect agency fees to go up: ISBA’s new Media Services Framework explained

Expect agency fees to go up: ISBA’s new Media Services Framework explained

Brands must be prepared to pay media agencies more to achieve better relationships, ISBA has told its members after releasing new guidelines over how advertisers should write their media contracts.

The Media Services Framework – the first update in three years – has been given a “fundamental overhaul”, ISBA said, after the advertisers’ trade body first began consulting with agencies, advertisers, auditors, and intermediaries two years ago.

By providing template contract language for advertisers, It aims to help brands hold media agencies to account when it comes to transparency in media planning and making sure agencies are neutral in their decision making.

For example, the bigger media-buying networks may be incentivised to increase income that is not declared to their advertiser clients, such as reselling a particular form of media to its media agency.

Now, the new ISBA Framework advises advertisers to demand that “inventory media” is not permitted without prior approval and should be itemised in a report to the advertiser.

Removing suspicion over ‘inventory media’ reselling

ISBA’s director of agency services, Andrew Lowdon, has warned the trade body’s members that agency remuneration will likely need to increase if their “non-declared income” is going down.

Lowdon told Mediatel News: “The investment in media is one of the single largest contracts for most advertisers. No advertiser would suggest a poorly remunerated agency leads to a sustainable relationship, therefore by default the advertiser wants to remunerate the agency fairly.

“It’s not a case of how much fees may increase, it’s a case of a more constructive and open discussion needs to be had to ensure both parties are happy with the outcome.”

There are already advertisers that prohibit inventory media from being used on their plans, Lowdon explained, and that it is important that advertisers know how and where agencies are using it.

“Without transparency the control to ensure media neutral planning takes place is lost,“ he added. “The use of inventory media is growing, as are the sources. Unchecked and at the extreme, all media could be traded as inventory media with no transparency. While not a likely scenario, the controls within the new Media Services Framework are fair and reasonable and don’t incumber the agency.

“While there is an element of extra reporting for the networks trading inventory media, it equally is a benefit to them as it removes suspicion through the additional clarity and the parties can ultimately align on the plan with greater transparency.”

‘The IPA will hate this’

The new Framework may also give brand marketers more influence within their own organisation by having clearer contract language over how their agency-client relationship is defined – as opposed to a legal or procurement team that may have different objectives to the marketing department.

Lowdon, who has more than 20 years experience of working on both agency and client side, led the development of the new framework, with legal support from industry expert Robert Wegenek.

While he would not be drawn on which particular agencies were consulted, Lowdon clairified that “both network and independent agencies were surveyed.”

However, there are concerns over whether this new contract will place too great a cost on agencies to be compliant with the new guidelines.

One agency consultant, who asked not to be named, concluded that “the IPA will hate this” because the media agencies are going to need a contract compliance function, similar to regulated industries.

“The chief financial officer won’t want to warrant compliance in case there is a breach. Most CFOs are members of the Institute of Chartered Accountants and can’t risk a major blow-up,” the consultant explained.

Richard Lindsay, the IPA’s director of legal and public affairs, told Mediatel News that the trade body that represents practitioniners hopes the new Framework will make a “refreshing change”.

“It will come as no surprise to hear that we were unimpressed by the previous attempts which were overly complex and unnecessarily onerous on agencies,” Lindsay said. “As we have always said, the relationship between advertisers and their agencies should be one of mutual partners, working collaboratively, rather than one of master and servant.

“If the new document recognises the expertise and professionalism of agencies and the great work they do for their clients, it will mark a real, positive change in the industry.

“With the document having only just landed, we will be looking at it over the next few days. Let’s hope it’s more balanced and enables advertisers and their agencies to get their deals done quickly without the need for laborious, drawn-out negotiations.”

When asked whether he expects the big advertiser holding companies to resist the language used in this new Framework, Lowdon insisted that “while there may be some initial concerns, I feel it is ultimately likely to be a benefit to the agency relationship with their client.”

There is also an attempt by ISBA to improve non-disclosure agreements and the management of confidential information. Media agencies are perennially cautious about how their businesses are audited and have been known to demand confidentiality agreements when asked to submit pricing information to auditors when pitching for new business.

Media contracts must keep up with rapid evolution of media

Scott Moorhead, co-founder of The Aperto Partnership, was consulted about the new Framework and advised advertisers to use it as a starting point for thinking carefully about their agency-client relationship and be prepared to adapt it to their specific needs.

“People forget that contractual and commercial baselines really drive any partnership”, Moorhead told Mediatel News. “To have a smart relationship you need to have well thought-through commercial contracts that should be favourable to the advertisers but also fair.”

Moorhead added: “This should be useful for any size of advertiser: whether they have a big legal department or not… Media keeps on moving and evolving, the way we measure and buy it keeps changing, so every contract needs to be frequently updated.”

The Media Services Framework 2021 and accompanying notes have been made available for ISBA members today.

ISBA launched the first version in 2016, when then director of consultancy and best practice Debbie Morrison declared media agencies did not have “the best interests of their clients at heart any more”.

This prompted a fiery response from Group M, which branded Morrison’s comment as an “insult”, while the IPA complained about not being properly consulted. ISBA maintained it trying to address advertiser concerns around a lack of transparency around media agency fees and rebates from media owners.

A second version of the Framework, launched in February 2018, was branded a “step backwards” for advertisers by media auditor and consultancy Ebiquity.

There was then a 2.1 version released later in 2018, which came about after ISBA and the IPA formed a joint working group.

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