Advertisers Challenge Big Three On "Integration Fees" - Broadcasting & Cable

Advertisers Rankled by Network Fees
Agencies Challenge Big Three 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 per 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.

By John Eggerton -- Broadcasting & Cable, 2/17/2008 9:00:00 AM

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

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ANA executive vice president Bill Duggan likened it to the movie Broadcast News. "There’s a scene with someone running down a hallway to insert a tape in a machine," he said. "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."

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"It’s rather interesting," Duggan said, "that only the legacy networks that have been around since the 1950s charge for these fees. None of the cable networks charges them, none of the newer networks charges them, syndicators don’t charge them. None of the owned-and-operated stations of the major networks charges 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 argued.

Duggan said some of the big-ticket advertisers on network TV can pay upward of $1 million in integration fees per year.

The fees vary by daypart, but they average about $470 per spot in primetime and evening news and about $230 per unit in daytime and late-night, the advertisers said, 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 made 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!"