Who can afford to blink first? WPP or C4
It has been reported in the Evening Standard and The Daily Telegraph that WPP and Channel 4 have reached an impasse in their re-negotiation of the deal done between the two companies two years ago, which runs out at the end of this month .
The Telegraph states ‘’although such negotiations often become fraught, tensions are running higher than usual and the issue has been referred to the Channel 4 board. More than a quarter of the broadcaster’s advertising revenues come through Group M, handing the media buying agency enormous leverage.’’
I heard months ago from various sources that WPP were gearing up for a showdown and that they had been preparing the ground by briefing their clients. This would be sensible given that a negotiation can only be taken to the brink with any credibility if you can threaten the ultimate sanction of walking away from the trading table.
WPP’s traders are clearly no slouches and I am sure that they would have presented a persuasive argument to the clients that things have to be improved if C4 are to represent value within the 2013 TV marketplace. No doubt a few WPP planners will have to review their programming strategies for the first quarter just in case things go silent on C4’s ‘’screen estate’’ and ia m sure a few are worried about the commercial impact of TV schedules with sub optimal reach and impact.
The interesting issue here is who is exercising market dominance ….with ITV’s wings clipped by CRR C4 Sales are the biggest sales house in the UK in a position to leverage their scale.
Is WPP’s issue that they feel that C4 are abusing that position?
Or is that they feel that WPP’s scale and market dominance warrants a better base price than anyone else?
If C4 end up agreeing with that principle, surely WPP can only get bigger as they write to their clients to triumphantly demonstrate the extra value they have leveraged from C4 as a result of their scale.
How do C4 trade with everyone else if WPP publicly declare themselves victorious?
And what responsibility do C4 have to stand up to threats of conditional trading across a wide range of advertisers who have variously profited from historic use of C4 and its line-up of channels?
And finally how do each of WPP’s clients know how they have done relative to the other clients in the deal book…perhaps their best bet would be to conduct an audit just within the pool of WPP’s clients! And it is plain that some of WPP’s clients will be getting extraordinary value from C4 and are going to have to suffer for the good of other clients.
I have written before that the victim of commoditised trading is the viewer (in the long run) as money fails to follow quality of TV programming. At the moment the ad funded solutions that many people are devising (including WPP) are no match for the average quality of Jay Hunt and Peter Fincham’s commissions and the money following content on You Tube ‘channels ‘ is a whole separate debate.
If anyone should take a stand for the long term quality of commercial TV it is C4…they are not in business to make short term profits…in fact they are not in business to make a profit.
They have a duty to offer value to everyone in the market and if they are being asked to provide a dominant buyer with disproportionate value it is very clear to me why they are talking at Board level.
Advertisers have since Ray Morgan was in short trousers had stand offs with media owners but we are now witnessing a very different dynamic at play. It will be fascinating to see who blinks first.