Industry blindsided by Shanghai rate change

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