wimpyI will gladly pay you Tuesday for an advertisement today.  Well, make that four months from Tuesday. That's no problem, is it?

As the Feds bail out the banks, the advertisers have apparently decided their agencies are banks. At least, that's how they're treating them when it comes to payment terms. Both the Wall Street Journal and Ad Age are taking a long, hard look at the story today.

It seems many agencies are willing to go along with advertising on the installment plan, forced on agencies by enormo brands such as GM and Anheuser-Busch.  Reportedly, GM, whose brand portfolio includes Cadillac, Buick and Pontiac, has offered to pay ad production firms half a TV spot's production costs 60 days after the first day of shooting, and the remaining half when the ad is finished.

The standard practice is paying half to three-quarters of production upfront.

A-B, meanwhile, told all its client TV, radio, cable, and other media-outlet partners that they could just cool their heels for 120 after they sending an invoice from now on. The company previously paid bills every month.

Is this how A-B pays its suppliers for the hops and barley that go into its signature beverage? Or how GM pays for parts and labor?

You know what this is going to lead to, don't you? Trickle-down economics. Agencies are called "agencies" because they're agents. They assemble talent, buy media upfront, and assume production expenses on behalf of their clients. And when they do so, they're expected to pay the bills, and the talent, on time.

In this down economy, back-burnered payment plans are already killing smaller shops as they struggle to make rent and payroll. Even big global holding companies aren't going to be able to hang on forever in a near cashless advertising economy - to say nothign of media companies (as if they don't have big enough problems already).

Yet earlier this month, A-B reportedly sent a letter to it partners that pointedly reminded them of its status as the world's fifth-largest consumer-products company, adding: "If you are not able to work with the change in payment terms, we may have to consider an alternative supplier."

If ever there was an occasion for industry unity, this is it. If the major advertising trade organizations can unite over behaviorial advertising and self-regulation, perhaps they can leverage their newfound cooperation to ensure the financial survival of their members.

Rebecca Lieb

Published 23 February, 2009 by Rebecca Lieb

Rebecca Lieb oversees Econsultancy's North American operations.

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