Group M Claims Victory in Integration-Fee Battle

But Buyers Say Networks Will Still Get Their Dollars

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NEW YORK ( -- Three broadcast networks that normally charge clients a separate "integration fee" to run each of their commercials may be backing off the practice, according to one of the industry's big media-buying operations. The question remains, however, whether removal of the fees reduces the overall costs of purchasing ad time on their airwaves.

A spokesman for WPP Group's Group M said the media firm had negotiated "deals with all three of the networks that were done during the upfront" in which "the fees are no longer." The spokesman, John Wolfe, said the firm would not offer specifics of the deals between Group M, whose subsidiaries represent marketers including Ford Motor and American Express, and the three networks still charging fees -- Walt Disney's ABC, General Electric's NBC Universal and CBS Corp.'s CBS.

Reduced manual labor
If those three networks have, in fact, agreed to do away with those fees, it would mark a significant change. For decades, the three oldest broadcasters have continued to pass on charges to advertisers for the procedure of physically placing ads on network airwaves -- even though technology over the years has gradually reduced the manual labor involved. What's more, News Corp.'s Fox and CW, which is owned jointly by Time Warner Inc. and CBS, don't charge the fees, nor do dozens of cable networks.

As digital processes begin to take hold, media buyers say networks no longer need employees to physically load tapes into network feeds. So they see little reason for the charges to remain, particularly when one estimate by independent media buyer TargetCast TCM in February put the total cost of the fees in 2007 at around $125 million.

Publicis Groupe's MediaVest has also been able to negotiate some deals that remove fees, said Donna Speciale, president-investment and activation at the media-buying firm, which represents Procter & Gamble and Coca-Cola. Discussions surrounding the fees have been going for some time, she said, "and it hasn't been until we started going to order" on upfront commitments that a no-fee deal could be finalized, she said. MediaVest has secured such a deal with ABC . "We came to an agreement and both parties were happy that moving forward there will be no integration fees," she said. She added that MediaVest is "still ironing details with the other networks."

While it looks as if the fees are going away, some industry executives are convinced the networks aren't giving up that cash. After all, why would the nation's three biggest broadcast networks agree to forfeit millions of dollars at time when the economy threatens the flow of ad spending? "Discussions have been ongoing about what would be acceptable to both sides, and the sides are starting to agree on the parameters. But it's simple math -- no one is 'wiping clean' anything -- the costs will need to be redeployed and that is what is being discussed," said one media buyer.

An NBC spokeswoman said the network was "in conversation" with clients. A CBS spokesman said the network was always open to discussing clients' concerns. ABC declined to comment. News of media buyers' ability to construct deals without the fees was reported earlier by AdWeek and MediaWeek.

The fees have been the subject of debate for years, and the Association of National Advertisers earlier this year mounted a campaign to get them revoked. In previous studies of ANA members, 87% answered "no" when asked if it was fair to be charged network integration fees by ABC, CBS and NBC. Members said the fee was a "throwback," "antiquated" and "a legacy charge."
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