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02/24/2009

Major Advertisers Putting Squeeze On Vendors

The biggest national advertisers in the U.S. are putting the squeeze on companies that produce and broadcast their ads. Their strategy is to rework contracts with suppliers to cut costs.

Over the past two weeks General Motors (Cadillac, Pontiac and Buick brands) have offered to pay ad-production firms 50% of a commercial´┐Żs production costs after the first day of shooting, and the remaining 50% when the ad is finished. This is a major departure from the standard practice of paying 50% to 75% of the cost before production starts.

Production house executives say the biggest share of their costs is tied up in labor and hard costs, i.e. equipment & locations, which have to be paid upfront. Unable to finance such costs, due to tight credit, such policies are thus unacceptable to the production firms.

Anheuser-Busch has its own twist: telling media outlets that they will have to wait 120 days after an ad runs to receive payment...a considerable extension for a 30-day standard.



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