Media commission system ‘absolutely ridiculous’

The media commission system has been branded as “absolutely ridiculous” by the boss of one of Australia’s largest agencies.

Mark Coad, CEO of OMD, told the Mumbrella Question Time that he can’t understand why the system still exists.  

Agencies receive a rebate from media owners for placing advertising with them. At one time, this payment – variously refered to as a commission, agency bonus or agency discount – used to be retained by agencies but in most cases it is now returned to clients anyway.

Asked what he would choose to change about the industry, Coad said: “It doesn’t keep me awake at night but the media commission system is just absolutely ridiculous. I do not understand why it runs like that and we should rework that in some shape or form. Media shouldn’t pay it in the first place.”

There have been calls to abolish the sytems for several years. In 2003, Ikon boss Gary Hardwick argued for its axing saying it was archaic and potentially led to biased outcomes.

Coad said: “We don’t even keep the full commission we rebate it back to clients and charge them our retainer because our financial models have moved on as well. We don’t get paid on what we spend, we get paid for what we do.

“80% of our revenue is based on fees and retainers. So the commission, the media give it to us, we give it back to the client. I’d rather just bill the client, pay the media and be done with.”

However, Coad said he was pessimistic about any change. He said: “I’ll tell you why it won’t happen, one is because no one cares enough about it, we’ve all got bigger fish to fry than that. The second thing is we’re not going to get a universal agreement that will happen at the same time anyway. It has to be universal. You know there will be some people who will sit there and think about it and say ‘I’ll just increase my rates by 10 per cent’ but that’s not going to happen either. I don’t think it’s a big enough issue to get that kind of universal consensus.”


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