Are Network-Integration Fees Legitimate?

By Bill Duggan

Last week ANA and AAAA (American Association of Advertising Agencies) issued a press release and a 1-page “perspective” on the topic of network-integration fees.

For many years, ABC, CBS and NBC have charged advertisers an incremental fee to “integrate” a commercial into its advertising breaks. The fees vary by daypart but are pretty consistent from network to network—approximately $470 per unit in prime and evening news and roughly $230 per unit in daytime and late night. This all adds up to an annual bill to advertisers that totaled $125 million in 2007 (as estimated by TargetCast tcm).

Currently, only ABC, CBS and NBC charge network-integration fees; no other broadcast network, cable network or channel, local station or syndicator charges advertisers to physically place their schedules. The press release and perspective were sent via email to the respective heads of ad sales at ABC, CBS, and NBC.

In ANA studies that were previously conducted, 87 percent of those surveyed answered “no” when asked, “Is it fair to be charged network integration fees by ABC, CBS and NBC?” Verbatim comments included:

• “The notion of integration fees is antiquated … This is a throwback fee from the old days when commercials had to be physically integrated into programming.”
• “It's obsolete and doesn't recognize technology changes.”
• “The fees are a legacy charge and no longer have a justifiable purpose.”

In addition to the $125 million, network-integration fees have other hidden costs to both agencies and advertisers. They are a burden for agencies to administer and the extra manpower required to do so invariably costs advertisers more in labor fees.

In today’s environment, marketers are demanding accountability from their media investments and transparency in their relationships with media partners. CEOs, CFOs, and procurement specialists are asking more questions than ever before about marketing expenditures and the impact on business results. Every dollar invested has to prove its worth. Given all this, it’s only natural that marketers are again questioning the network-integration fees charged by ABC, CBS, and NBC.

All advertisers and agencies should “do the math” for their companies or clients on the annual cost of network-integration fees. If those payments seem excessive or unjustified, advertisers and agencies are encouraged to bring this issue up at every opportunity with ABC, CBS, and NBC to encourage a dialogue on the purpose and value of network integration fees.

We welcome a response from the respective networks. Why do network-integration fees still exist in today’s media environment? Can network integration fees be rationalized? In fact, we have formally invited the networks to join a task force to be convened no later than May 1 to address the practice of charging network-integration fees. Responses from each of the networks are still pending. Stay tuned!

Of course, we welcome thoughts from the marketing community on the issue of network integration fees.

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