Channel 4 in ad revenue dust-up with Sorrell’s WPP

 

Channel 4 is facing the prospect that the world’s biggest advertising group could, from January, pull all its ads in a major test of strength over the cost of TV air-time.

Group M, the media-buying arm of Sir Martin Sorrell’s WPP, wants improved terms for its deal, worth an estimated £200 million a year, but C4 is reluctant to acquiesce.

It is understood that the two sides are far from being in agreement, with an existing two-year deal due to run out at the end of December.

The timing is crucial as the annual trading season between agencies and media owners reaches its climax, with advertising clients anxious to keep a lid on costs amid fears of a “triple-dip” recession.

Those close to C4 acknowledged that Group M could pull its ads if a deal cannot be reached, although both sides stressed there was still time left.

Such negotiations often take until the last minute and have been known to last into the period between Christmas Day and New Year, but industry observers said C4’s talks with Group M were unusually tense.

“It’s a case of who blinks first,” said one source, who claimed the deal is so crucial to C4 that its board has discussed it.

C4, whose hits include drama Homeland and comedy The Inbetweeners, relies heavily on advertising for its near-£1 billion-a-year turnover. The state-owned broadcaster sells ads on behalf of C4’s family of channels, including E4 and Film4, and also UKTV’s channels such as Dave and Good Food. The TV ad market has been flat this year, despite the Olympics.

Group M wields huge clout because it is the biggest agency group and is responsible for around 27% of C4’s advertising take. Clients include Barclays and BSkyB.

The WPP subsidiary pools clients’ money to get a better price on a group basis than a client could get on its own. That is why clients are happy for Group M take a robust negotiating position. C4 came under pressure from some media agencies this year after its programmes attracted fewer viewers than expected in the important 16-34 age group.

It is not unprecedented for a media agency to withdraw ads.

Carat, a subsidiary of Aegis, boycotted Channel 5 two years ago. C4’s reach is close to three times that of C5, so it is unclear how advertisers would feel if they could not reach that bigger audience.

A C4 spokesman would only confirm it is “in the midst of trading season negotiations with media agencies for 2013”. Group M declined to comment.

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