Join the debate at News International's blog: The Big Media Debate
Who's who on the panel
Roger Parry is chairman of Media Square and YouGov, having chaired Johnston Press from 2001 to 2009. Before this Parry was CEO of Clear Channel International for seven years, and spent time as a consultant at McKinsey & Co. His first job in 1976 was as personal assistant to Charles and Maurice Saatchi, the founders of Saatchi & Saatchi.
Steve Hatch was made managing director of WPP's MEC (formerly Mediaedge:cia) in 2008 and since then billings have doubled to £640 million. The agency was Media Week's Agency of the Year in 2009.
News International commercial managing director Paul Hayes is responsible for the commercial success of The Sun, News of the World, The Times and Sunday Times. He joined the company in 2000 as general manager. Hayes is a key player in NI's imminent adoption of paywalls.
Fiona McAnena is group brand director at Bupa. Before this she was VP for innovation at PepsiCo. As chief executive of CIA in 2002, McAnena led the agency's integration with The Media Edge.
In 2006 Pete Markey joined More Th>n as marketing director from Onetel, where he was head of marketing operations. This was after marketing roles at the AA and British Gas. He was voted the Marketing Society's Marketer of the Year in 2009.
As chief executive of Global Radio, Stephen Miron controls an estimated 40 per cent of commercial radio. Before moving to Global in 2008, Miron spent 16 years at Associated Newspapers, his final role being managing director of The Mail on Sunday and Mail Digital.
Steve Williams is chief executive of OMD UK Group, putting him in charge of £750 million in media billings for clients such as Sony and Camelot. Williams chairs the IPA Media Futures Group.
Live report: the debate in full
The pressing issues facing media agencies felt very distant as senior media players gathered on the top floor at one of London's tallest buildings.
In the vertiginous surroundings of the Altitude Bar on the 29th floor of Millbank Tower, with its 360-degree vistas of the Houses of Parliament and beyond, the minds of even the most hard-nosed media players might wander.
But The Big Media Debate, hosted by News International in partnership with Haymarket Brand Media, quickly brought participants down to earth. It centred on a collection of sobering realities that have defined the media arena 2009 and 2010: clients have been forcing media agencies to pitch for accounts based almost solely on the low price they claim they can negotiate from media owners.
Media owners are rebelling and refusing to give extra discounts. Increasingly clients are able to go direct to data-rich media owners such as News International, now that web technology allows this. As an uncomfortable backdrop, the ghost of recently liquidated agency i-level looms large.
Media Square chief and chair of the debate Roger Parry set the tone by talking about the trio of interests involved in the live debate, and their motivation. In broadest terms, these were agreed to be impact (for advertisers), value (for agencies) and income (for media owners).
That triumvirate was well represented in the 150-plus audience, with Ian Armstrong, manager - European communications at Honda rubbing shoulders with Associated Newspapers' deputy group ad director Rosemary Gorman and David Pemsel, group marketing director of ITV.
"We struggle to articulate what media value is," said Global Radio chief executive Stephen Miron, as the debate kicked off. "The brutal reality is that in 2010, it is all about price and that's having a detrimental effect."
All such gatherings have elephants parked in the room, but on this day MEC chief Steve Hatch ensured Google wasn't one of them, praising the search giant's efforts to become a "less arrogant" media owner by involving media agencies in its discussions with advertisers.
There were moments of searing honesty from Bupa brand director Fiona McAnena, vying with Miron for the event's plain-speaking award, as she revealed that clients were not preoccupied with being part of any system, tripartite or otherwise, and that she did not have a media hero or heroine.
Natural alliances formed on the six-strong panel. McAnena and More Th>n marketing director Pete Markey found common ground on issues such as the client's need for auditors to police media buying and prices.
There was much talk of life in the "real world" from the agency representatives on the panel, Hatch and Steve Williams, chief executive of OMD UK, and owners Miron and Paul Hayes, managing director of News International Commercial. "We're in a recession and clients are seduced by cheaper prices," Hayes said.
Or could the Big Media Debate panellists be inspired by their elevated surroundings and, putting aside the acknowledged vested interests, agree to find a solution?
Roger Parry, debate chair, starts the debate by asking: How do you interpret "value"?
Pete Markey: Value is more than just pure price. The insurance market is very competitive and commoditised, and value is about giving us clear, strong, competitive advantage.
Fiona McAnena: We want to be seen and heard, to tell our message in a way that's going to wow people and sell stuff. And all the things media people talk to us about (TVRs, OTS's etc), we don't care! That's just a means to an end. Value to me is when partners say, with this budget here's how we can help you achieve your goals.
Steve Williams: For me there are three components to a media agency delivering value: talented people, doing great work and at a fair price.
Paul Hayes: For media owners it's value in, value out. We invest hundreds of millions of pounds in content and we want to get value back out of that. I'd define value as in "value add", which is all the new and interesting things that media owners can do with clients and agencies.
Stephen Miron: The brutal reality is in 2010, "value" is all about price unfortunately, and that's having a significant detrimental effect. We all understand what value should be, but the current business model doesn't really recognise that.
Rachael Stilwell, publishing director, Haymarket Brand Media, asks: Can this three-part system of clients, owners and agencies actually survive, and how?
Steve Hatch: The tone of the question suggests it's in the future but there's a fair amount of disintermediation now. Media owners are brilliant at explaining their medium but are less experienced in being brand centric, while the role of the agency is to synthesise these two things together. Part of our marketplace has commoditised - we've got to prove our value in the other bit.
FM: The question suggests a three-part system - we don't think of ourselves as part of any system. We don't mind where good ideas come from.
PH: Fiona's point is well made. And what is the next version of the agency-client relationship? Take Morrisons, with whom we talk directly and the agency supports us in that. The more forward-thinking agencies aren't afraid of facilitating conversations between interested parties.
PM: I'm having one of those "I agree with Nick" moments. Media agencies play a great role in making strategic recommendations on the right media to use. We've [also] got a direct relationship with Global Radio - the media agency helps coordinate it. I wouldn't see any value in breaking that down.
SW: There was a better opportunity to disintermediate agencies 20 years ago when the world was simpler. Now with digital, data and social, marketing is 24/7. So I suggest the equation has five constituent parts. We're not only competing with media agencies but all manner of agencies. I'd throw media auditors in there too because like it or not, they are part of this stakeholder relationship. We need to earn the right to be the glue between client and media owner at every point.
SM: We are reaching a standoff because of the scale of media owners and media buying groups. In these scenarios clients are going to ask both parties - why am in the position where the agent can't do a deal?
David Weeks, director of strategic sales, Dennis Publising, asks: Do you feel agencies are too focused on their inputs, namely the cost of media and their fees?
PM: If I don't hit my numbers my CEO won't invite me to dinner. Buying media at the right price is part of that, but is not the be-all and end-all.
SW: Well said. Inevitably, though, the relationship starts with a pitch and so we end up fixating on that. A big challenge for the industry is to understand what outputs we can realistically impact.
FM: We have to remember that media spend is the single biggest line in the marketing director's budget and we have to scrutinise it. Occasionally I get emails saying, we looked at your plan and we reckon you overpaid here and there. That's the media agency saying, it's all about price.
SH: We are very comfortable in the area of price and hence you get those emails. Focusing on outputs is incredibly hard, not least because clients are playing on the downside. [But] we've had some very enlightened pitch processes in the past two years. Lloyds Bank and Orange spring to mind. The willingness of those clients to pay fees for great people has never been stronger.
SM: A large client recently asked agencies to pitch on email with a spreadsheet. The brutal reality is that we're into the media equivalent of the subprime market, where people are gambling on the future. Agencies call me to say, "we've just won this account and we've guaranteed to the client that we will buy your media at less than the previous agency". That's real world and it's got to stop.
PH: Clients can say we want a good price [but] we're not cheap because we invest in the product. Yet a standoff with agencies is not in our interest.
Ian Darby, media editor, Campaign asks: Should it be illegal for agencies to offer price guarantees? How can they promise a price when they are not the supplier?
SW: It's so important for an agency to maintain its reputation in this area. Ultimately clients will punish agencies that don't do what they say they'll do. That's the tipping point on which the market will reset.
SH: That's already happening. There are examples of litigation between clients and agencies around the world because of lack of delivery.
PH: I'm not going to name any names but I bet that one or two big old trading issues pop up in the next 12 months. And that's because we're in a recession and clients are seduced by lower prices.
Marc Mendoza, CEO of MPG, asks: On the basis that the free market does rule, are media owners being unrealistic?
PH: We have to get a return on our investment. The problem is oversupply - too much media and too many agencies.
SH: I find that some media owners have a sense of entitlement... just because it's been invented doesn't mean that it gets bought.
Claudine Collins, head of investment, MediaCom, asks: Can agencies do more to use the vast amounts of data on audiences to create value for advertisers?
PM: It's got to be stuff that we really need to know. I've had people arrive with 60-slide presentations and I'm asleep by the third one.
FM: My problem is there's far too much data and my heart sinks when someone says, "we've got some really interesting data". It's about having some insight to help us make a better decision.
PH: Media owners are ahead of agencies in that we are prepared to invest in data. Our sister company Sky is entirely data-driven and its success is predicated on that. As [News International goes] down the pay-wall route, the data that aids behaviourally targeted ad messages will drive our business in the future.
SH: Data absolutely is going to transform what we do but it's only as smart as the people interpreting it. The minute data drives the decisions, you start eating away at the core of the brand.
PH: MBNA is a very successful company, [but] it's not brand-driven as you and I would define it.
SH: I would add to that, as they are our client.
Kelly Parker, business director of MPG, asks: What are the implications of i-level going bankrupt?
SW: It's really sad in that a lot of people have been affected by it. I-level was a great company and there's no question specialism was required in that zone in the past. But it says to me that the market is resetting itself, coming away from specialism and seeing more value in integration.
SM: I'll say what I think everybody wants to say, in that it's good news for media agencies. Where agencies have invested in digital, where you have the opportunity to make income from offering a very bespoke service, [i-level's bankruptcy] proves that you can't. The good news is most of those people have been reemployed, but the concept of it sitting outside the media agency was wrong and it's going back to where it should be.
Paul Rowlinson, investment director, Mindshare, asks: If there's one element that sucks a lot of energy out of this business, it's media auditors. Shouldn't every client sack their media auditors?
FM: That's hilarious! It's not enough that you invite us to Wimbledon and jet us around the world, which our colleagues and finance people see, and you're suggesting we sack the people who mark your homework! It's far too big an item. We marketers are thought of internally as having the nicest time. We have to mark the homework and be seen to mark the homework. I would say some media agencies make an art out of speaking a foreign language and so we are going to pay someone to help us. There's no chance of us sacking our media auditors.
PM: I'd agree with that, but I am missing out on those Wimbledon tickets though.
RP: They went to your auditors.
PM: We've only got limited resources and I haven't got time to check whether the agency has put my ads on Bravo at 2am as opposed to 7 o'clock during Coronation Street. Auditors help with that kind of thing, asking was the quality and the price right.
SH: If we didn't have [auditors] as a benchmark we'd have to invent them. We are happy for them to be involved, because if we're good, we're good, if we're bad, we're bad.
SM: Fine if they measure in an accurate way but the problem is they don't really know how to mark the homework. Let's be honest - auditors are the media equivalent of a parasite. Someone should just set up comparethemediacap.com. If you tell me auditors help you in your business, I feel for you, Fiona.
FM: Tell me... how have media auditors damaged my business?
PH: They get it wrong! You're absolutely right we need a benchmark if you're spending millions of pounds of shareholders' money. Auditors count price but they need to count value.
SW: If we didn't have auditors or a pitch for a year, you watch the quality of client work go up. But it's not the real world. Media audits keep people honest to a certain extent. I'd question, Fiona, whether it's a language issue on how you translate what media agencies are saying. It's more about needing that assurance and corporate governance.
Mark Palmer, founder, Maverick Planet, asks: Can the panel name those people who are exhibiting best practice within this joined-up relationship?
PH: My standout is Phil Georgiadis at Walker Media - he's got two big clients M&S and Barclays. He knows those clients have been guaranteed prices by the big boys, but they stay with him because he works harder for them and understands the process.
SW: We should hold what the IPA does in high regard. They do a lot of work behind the scenes and keep us motivated. The IPA TouchPoints piece is now an industry wide currency for the new world that's emerging.
FM: I can't name any names. The fact is that we don't give it much thought. What's good for someone else is not necessarily good for us.
SH: Google is doing a fantastic work with agencies and clients. They've gone from being the most arrogant person on the planet who wanted nothing to do with those guys in the middle, to investing in agency and client relationships.
Roger Parry, chair, asks the concluding question: What changes are needed to make the system to work better and what will you do to make change happen?
SM: Someone should take responsibility for setting up an FSA-type body [to regulate media], whether that's ISBA or the IPA. I'm not proposing that media should be heavily regulated, but the OFT is looking into the role of outdoor. There is greater interest in how our business operates and we have to be prepared for that. Unequivocally there should be a root-and-branch examination of the role of media auditors, and they should fall under the media services body.
PM: There needs to be an education piece on the true measures of value and how we ensure we have the best innovation and how we remunerate that, especially in the digital space.
SH: The industry - not just individual media agencies or media owners - has got to reprioritise the value that we create. If we don't start being more forthright about what we do and that we expect to be paid a fair amount, then we could end up going down the commoditised route.
SW: It's about proving value every day, as well as an obsession with relationship and performance management in equal measure. We've got a brilliant opportunity but our collective business is at a bit of a low point, hence the debate today.
FM: It's about people being close to our business so it's incumbent on us as clients to create the opportunity for our partners to be close to us.
PH: There's unanimity and clarity about the problems and the solutions (see box, left), and a sense we are at a tipping point. Steve's suggestion that we need a media FSA equivalent is a great idea and we as News International would be happy to participate in that, and hope to bring the rest of the newspaper industry with us. What we need next is a debate around remuneration, the role of agencies and how they get their homework marked. I hope the IPA gets involved, under ISBA's control, because ultimately we're all answerable to the client.
Suggestions from the panel
1) SET UP A MEDIA REGULATOR
There is a case for setting up a media regulator, with the Financial Services Authority as a model, to monitor media buying and selling. The client body ISBA is the most appropriate organisation to drive the establishment of such a regulator.
2) EXAMINE THE ROLE OF AUDITORS
In tandem with this, the role of media auditors in negotiations needs closer examination to ensure a fair price is being paid for media.
3) AGENCIES NEED TO DEVELOP A SOUNDER BUSINESS MODEL
Urgent action is needed to ensure the future of media owners and agencies, in particular to develop a sound business model for media agencies that are in danger of disintermediation.
4) FIND A CLEAR MEASURE OF MEDIA VALUE
Faced with being viewed as a commodity, the media sector (owners and media agencies) needs to act in unison to redefine its category and develop a clear measurement system of the value it creates.
5) CLIENT EDUCATION
Clients have a role in educating their internal stakeholders on the value of media and to support the development of a more precise measurement and fairer remuneration system.
6) GREATER CLIENT UNDERSTANDING BY AGENCIES
Agencies must realise the time pressures clients are under and make only relevant proposals to experiment with media choices.
Report by Noelle McElhatton