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’s 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.
