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October 14, 2013

How to Ensure You Get Paid for Media Buys


      Mary M. Collins

With advertising representing a large piece of the revenue pie for most cable programming networks and system operators, the demise of KSL Media serves as the latest reminder that media companies need to ensure both advertisers and their agencies agree to liability for payment of a media buy.

Consistent with the trend toward consolidation, KSL had become one of the country’s largest independent media buying organizations, operating the KSL Media, TV 10s and Fulcrum 5 media buying organizations. When it filed for bankruptcy protection earlier this fall, the company owed its creditors nearly $100 million.

Those creditors include cable networks such as AMC, Animal Planet, E!, ESPN, Food, Golf, HGTV, and Travel, and are owed amounts ranging from just under $600,000 to more than $4 million for ad time, according to analysis of the court filings by Wanda Borges, a bankruptcy attorney who represents media companies in these situations. Adding insult to injury, they had to scramble to find advertiser contact information and to begin the tedious process of determining who had paid KSL and what they’d paid.

Consider what can happen when it’s the advertiser and not the agency that files for bankruptcy. If the agency placing the order is never paid, media companies can have a very hard time going after the advertiser without the paper trail that holds the advertiser liable. That was the situation when GM filed for bankruptcy in 2009. Despite being owed millions of dollars for running GM ads, not one media provider was listed as a debtor the bankruptcy filing. All the money for advertising time was considered owed to the buying agencies.

Before the mid-‘90s, agencies assumed responsibility for paying media providers. A couple of high profile client bankruptcies led them to adopt a sequential liability position—they’d pay the media after they’d been paid by the advertiser. Media shot back with dual or joint and several liability—everyone was responsible until the media bill was paid. Unfortunately, a number of factors, including consolidation in the agency world, and competition from emerging media platforms, all in a down economy, led most media companies to accept the agencies’ terms.

For members of BCCA, the media industry’s credit association, the GM bankruptcy served as the clarion call for resolving both the liability and transparency problems. It was clear that more paperwork was not the answer - neither advertisers, nor their agencies would be willing to complete multiple credit applications for each ad buy.

The result is a cloud-based tool called EMCAPP®, the Electronic Media Credit Application. In addition to providing advertisers with a no charge, one-stop shop to complete media credit applications, EMCAPP’s credit terms include what our members describe as “sequential liability with teeth.” They say that the advertiser is responsible for payment until the funds for the buy have been transmitted to the agency or to the media provider. Requiring the advertiser and the agency to each complete an application provides accountability and clarity.

EMCAPP’s credit terms also hold agencies responsible for responsible for keeping accurate client payment records and prohibit holding payments for non-disputed portions of invoices. They also make the media provider the agency’s collection partner by giving it the option of contacting delinquent advertisers directly (after notifying the agency of its intent).

EMCAPP’s secure site launched in the spring to favorable reviews. Applications can only be accessed by media providers authorized to use database. It has been recognized by NACM, the National Association of Credit Management, as an example of best practices in online credit applications. The application reduces paperwork and speeds up the media buying process. The time media sales staff used to spend chasing credit paperwork can now be used for business development. It also gives credit departments a complete, legible application void of crossed-out terms. Credit term changes are made outside of database and confirmed in writing by both parties.

I encourage you to visit the EMCAPP website, http://www.emcapp.com, and explore how it can help your company to improve its credit and collections metrics.
It’s unfortunate that it’s taken the threat of significant ad sales revenue losses to cable programming networks to focus our attention on the issue. I hope that solutions such as EMCAPP make us better prepared for the future.

(Mary M. Collins is president and CEO of the Media Financial Management Association and its BCCA subsidiary. She can be reached at mary.collins@mediafinance.org.)







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