Tuesday, 5 November 2013

YouTube are changing their deals with TV Stations and Movie providers. But in doing it, they're encouraging that old no no. Media brokering.

YouTube is starting to flex its muscle.

In the past, it encouraged TV Stations and Movie makers to put their content up on YouTube in return for what was called a "sweetheart" deal. Basically the content provider (Movie Studios/TV Stations) got 70% of the Ad revenue in return. More favourable terms than other content providers got....but YouTube got good content.

Movie clips, TV programmes, etc.

Not any more.

As those content contracts are being renewed, YouTube are now offering them, 55% of the advertising, with YouTube retaining 45% - so down from the 70%

Basically these are now, the same terms YouTube offers everyone else - so no longer "special deals" for the networks anymore.

However, (I think this is most dangerous part,) YouTube have agreed to "cap" this share - to limit the YouTube take. So they'll take the 45% to a certain amount of money and after that is reached, the TV stations/Movie makers can keep 100% of what's left. Therefore, if the movie/TV stations (content providers) get more Ad money than the "cap", they keep it all. What's being called the "threshold".

So if the content producers sell more advertising at higher prices, they benefit in full. And this deal encourages them to do that. They will charge their advertisers more than they're actually paying.

In my mind, this is media brokering at its worst. An activity which has always been frowned upon, if not considered illegal, and certainly considered sharp practice. 

The traditional Ad Agency model of commission (and in this case, the TV stations can be considered Ad Agencies because they're "selling on" other media), is based on a % of the true media cost. An advertiser rightly expects that the Ad Agency to be paying the media the exact price shown on the invoice and simply deducting a commission.

If for example, an Ad is 100 quid, it's charged to the client at 100 quid, less 15% commission (or whatever the agreed commission is). Transparent, above board. 

In this way potentially however, if the same Ad is 100 quid, but the seller negotiates it for less, say 70 quid, and yet still charges the client the 100 quid, that's media brokering. You're charging more than you're actually paying.

Ad Agencies could have made fortunes (I could have) if we behaved as media brokers. Wholesaling media if you like.

And the same TV networks would be livid if they saw Ad Agencies inflating their prices to advertiser clients. Now they might be doing the same thing. In fact, it's a condition for Ad Agencies not to behave like that in the original Ad Agency licence agreements with the same media. And yet, it seems, that's now how media will operate in this deal - if they accept it.

In this YouTube case now, the advertiser would be paying a very probably, higher inflated price to the TV network for their YouTube advertising because the TV network will want to exceed the YouTube "cap". The more they get from advertisers, through higher pricing, the more they keep.

In order to "blur" these transactions, I'd expect to see the TV networks hide from transparency by "bundling" the YouTube airtime with other advertising as "packages". Which ironically, they in turn will probably try to sell on to Ad Agencies!

So if it's accepted, it's a very dark, dubious practice to say the least. And reflects badly on YouTube for suggesting it. For facilitating it. For encouraging it. 

If of course, I'm not misunderstanding it.
Doubt it.....