Industry blindsided by Shanghai rate change

SHANGHAI: Flagging ad revenue has led Shanghai's emerging television monopoly to unilaterally cancel advertisers' contracts and raise the cost of air-time "within hours" of announcing its rate equalisation policy. The Shanghai Media and Entertainment Group (SMEG) directive has sent agencies scrambling to protect advertisers' rates, which will rise 10 to 20 per cent depending on their contracts. Media agencies said they feared that the cartel's move could have a domino effect across China. The worry is that the ongoing consolidation of the sprawling television sector will result in equally powerful media groups popping up in other cities and copying Shanghai's lead. One of the more powerful media entities to emerge from the consolidation, SMEG appears to have blindsided agencies with the move. "The industry was expecting mergers but few thought Shanghai would be first," said Aaron Wild, general manager of Universal McCann China. Simon Woodward, executive director of broadcast for Carat China, said: "Everyone is now expected to operate under the same rate, which ignores discounts based on how much business agencies were able to book in the past or a client's buying history." The move has sent agencies scrambling to protect their clients' rates and help maintain their TV weighting for the rest of the year. Zenith Media Beijing general manager, Derek Kwok, said: "What we have tried to do in the short run is to protect the benefits of big advertisers first." But SMEG, which is said to control more than 90 per cent of the city's TV output, has refused to budge, agencies reported. A media director added: "We've discussed our point of view but the TV stations are not interested. They have taken a very strong arm approach - obviously as a monopoly they can employ such a tactic." Agencies said SMEG believed the policy would help prop up ad sales, which have contracted because of worries about the economy. - See analysis, p15.

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