The importance of media agency contracts

Managing Marketing is a podcast hosted by TrinityP3 Founder and Global CEO, Darren Woolley. Each podcast is a conversation with a thought-leader, professional or practitioner of marketing and communications on the issues, insights and opportunities in the marketing management category. Ideal for marketers, advertisers, media and commercial communications professionals.

David Angell is Head of Media and General Manager at TrinityP3 and has just started his own podcast called Media Angle where he interviews media influencers on all the media angles. But here he talks with Darren about the role and importance of robust, relevant and rigorous media contracts to ensure transparency, value delivery and performance.

When clients ask me about reviewing the contract terms; does this mean should we go to pitch every year?

No, not at all. The whole idea is that you regularly review contract terms so that a relationship stays fresh, commensurate and appropriate and has the right things attached to it because agency/client relationships are constantly evolving.

But it can also come from the agency making different recommendations, adapting to trend, offering different services, evolving their own business model. Trends in remuneration change certainly in the media, creative, and advertising area with regard to what content needs to be produced and how often, and what are the implications on the media buyer as a result of that.

But then it should all refer to the schedule or appendices—all the bits that do change. It’s almost like the two chapters; the Old Testament and the New Testament. The Old Testament is literally set in stone but the 2 nd half (all of the appendices or schedules) are the things that can change because they need to change otherwise the whole contract gets thrown out.

It does in that a lot of the advertising client’s money flows through a media agency and out to other 3 rd parties. In an agency/principle relationship the agency has a degree of fiduciary responsibility to act in the best interest of its client whereas in an independent contractor agreement there isn’t the same rigour around that opens the agency to be able to indulge in opaque business practices or practices that are not necessarily in the best interest of its client.

And they would take the risk and in return they would get a 10% commission. That’s the original agent agreement. Fast forward to today and we’ve still got agency relationships, apart from advertising which has become a bit blurred. We’ve still got real estate agents; news agents and all of these people act as agent and principle relationships.

I think that’s very fair—there’s a lot in that. We talked at the start about how a contract should be mutually beneficial and commensurate for both parties and absolutely whilst there has been so much furore about agency transparency that is a two-way street. A contract has to be fair and reasonable to both parties and Mark absolutely has a point.

Principle/agent but the organisations often do want to have their cake and eat it too. I think that often extends into other areas of contracts. As you say, agencies spend millions and millions of dollars and yet sometimes have to sign contracts with 90, 120-day payment terms. Even for a big agency organisation that creates significant cash flow issues.

I think trust is developed over time obviously in a relationship, but trust has to be built on the right foundation. There would be lots of clauses in a contract that you would hope would never have to be enforced but at the same time you certainly need that foundation at the start of a relationship in order to build trust with confidence because trust requires confidence in the relationship.