A Media Contract Horror Story

An advertiser places a lot of insertions in national press. Let’s say 3 per week at a cost of £5k each. That’s £15k per week, 156 insertions, £780k per year.

The advertiser decides to appoint a media agency. The advertiser signs a media contract with a media agency. The contract stipulates all the terms of the commercial agreement between the advertiser and the agency. The contract also includes a list of press titles and guaranteed page rates.  Unfortunately, whilst the pricing for each title is good, it is a fixed price. If the agency manages to do a deal with the media owner where it buys the pages for less than the contract price, the agency takes the balance between the actual price and the price in the contract.  There is no provision to refund this balance in the contract.

So, let’s assume that every press insertion is actually bought by the media agency for £3.5k. The agency then makes £1.5k additional margin across 156 insertions – that’s £234k additional income to the agency.

The agency would pass this budget on of asked, but they weren’t asked.  Not asking that question or providing for the eventuality of the agency buying below the contract page rates for press costs this advertisers £234k per year.