It is canceling its contracts with reps Katz Media Group and CoxReps to take the business in-house. It has hired former Katz execs Becky Meyer and Mike Jones to head the effort, which it expects will save it $8 million-$9 million next year in commission costs.
Gray Brings Its National Rep Biz In-House
Gray Television on Monday said that it has dropped Katz Media Group and CoxReps, its national advertising sales representatives, opting to handle such deals itself. Currently, Gray directly handles national advertising sales at approximately one-quarter of its television stations. In January 2016, Gray said it will expand this direct sales approach to nearly all of its television stations.
“Katz and CoxReps have served Gray’s stations very well over many years,” said Hilton H. Howell Jr., Gray’s CEO-president. “After very careful consideration, we have determined that the rapidly changing marketplace now requires that nearly all of our stations directly interface with national advertising agencies and clients.”
Gray has hired Becky Meyer, formerly the VP of sales for Katz Media Group’s Continental Television Sales division in Chicago, to lead its national sales efforts as its new VP of national sales. In addition, Gray has hired Mike Jones to be Gray’s new national director of political sales. Jones formerly represented scores of television stations in national political advertising sales, including many of Gray’s stations, as a VP with Continental.
Gray said that the amount by which its national advertising sales commissions will decrease (after increases in Gray’s own personnel costs) “depends primarily on the volume of national advertising sales revenue, and especially political advertising revenue, that the effected stations achieve once they directly handle their own national sales. We anticipate that expense savings due to the termination of the national advertising sales representation agreements, net of increased personnel expense, will be in the range of $8 million to $9 million in 2016, with net savings continuing in the years thereafter. In addition to these cost savings, we expect that our new strategy will have at least a marginally positive impact on national advertising revenue.”
The termination of the representation agreements will trigger termination fees payable to the former national representation firms that will be payable in monthly installments throughout 2016 and 2017. Gray said it will record a special charge to its third quarter 2015 broadcast expenses of approximately $6.1 million to reflect the anticipated termination fees. “We did not include this special charge in the guidance for our anticipated third quarter 2015 results that we issued on Aug. 6, 2015,” it said.
Comments (11)
Christina Fleming says:
August 31, 2015 at 8:41 pm
I am sure they will save 7-10mm in commissions. I am also sure they will lose at least twice that much in revenue. They are following the very unsuccessful Adam and Vincent Young run.
Joe Jaime says:
September 1, 2015 at 8:59 am
I would consider exempting political from the rep……. or reducing the commission … but not day to day spot.
Valerie Norvell says:
September 1, 2015 at 9:22 am
Although I do believe that the media representation firms need to continue to adapt to the ever changing advertising landscape in order to stay viable, I find it hard pressed not to see the GRAY Broadcasting move as nothing more than a short term move that will further isolate their small market footprint. Additionally, the negative impact to the agency world and the SPOT dollars, will have long term negative ramifications. As SPOT TV dollars continue to leave the medium and move into digital and more non traditional advertising models due to the difficulty of buying and managing SPOT TV schedules, GRAY Broadcasting just gave advertisers another reason to cut more money out of SPOT TV budgets. Unfortunately hurting the Tribunes, Sinclair, Media General’s of the world. GRAY’s knee jerk change just for the sake of change, without thinking of infrastructure, staffing, electronic delivery systems makes it that much harder for those of us broadcasters who are fighting hard to increase the spending on our TV stations, in addition to fighting the unfair regulatory practices of the FCC. I believe many advertisers will try and buy around the GRAY stations but I also believe many will reduce overall planned GRP’s for those markets. A chain is only as strong as it’s weakest link and in this case, GRAY, I fear will end up hurting overall revenue for all of us.
alicia farmer says:
September 1, 2015 at 9:36 am
Monumentally stupid move.
Dale Godfrey says:
September 1, 2015 at 9:59 am
Oooh, that’s a big move. I like Gray’s management people and have worked with a few of their GM’s in the past. But it IS a big tradeoff, and it hasn’t worked very well for station groups in the past. Tread carefully. I made just a simple 4-station
rep change once a few decades ago – resulted in lower commissions, an overall better trained group of street fighters, and in the end it worked out very well. But the losing rep firm was openly bitter about their loss – something Katz and Cox should guard against! Being ‘jilted’ is never an easy pill to swallow; its a small business, and it appears Gray’s gonna do this thing, so let ’em try, and perhaps there will be some valuable lessons learned for stations AND reps as we go forward in waters that are rougher and murkier than ever!
Mike Long says:
September 1, 2015 at 10:27 am
I love all the comments from those out of the business. I work at one of the Gray Stations that does not have a rep and guess what, we are having a great year. Buyers are happier, we give better service, more creative ideas, better guidance on pricing and most of all faster service. Technology has changed the need for middlemen. My question to all the experts who say Gray’s move is bad, can you look at your shareholders and defend the commission?
Valerie Norvell says:
September 1, 2015 at 11:09 am
@teevee99 you are obviously a local AE at one of the smaller GRAY markets as your comments illustrate your overall lack of industry knowledge. Think big picture here and how making SPOT TV more difficult to buy negatively impacts the rest of us, including GRAY’s bottom line. As broadcasters, we are all in a battle to keep the revenue in SPOT and having the General Managers within my group assign agency business to their local AE’s as opposed to generating and increasing local direct and digital business is small minded.
Mike Long says:
September 1, 2015 at 12:45 pm
John, thanks for condescending comment. Not an AE, and a former national rep, and have sold Big Market Stations like yours. There is no more spot, it is all either transactional or local direct, with more regional going local direct everyday because of better service. The transactional is based 100% on price. The idea that reps influence the planning of spot is a joke. Efficiency will ultimately win out. I won’t have to worry about explaining why I have bloat in my sales force in the future, but I bet you Big Market guys will have to answer this in every budget discussion in the future.
William Bremner says:
September 1, 2015 at 11:29 am
With more than half of Gray’s TV markets located in markets ranked #140 or greater, I bet Katz (who rep’d ALL of the Gray properties with the exception of 2) are probably excited to lose these booming markets. How much commission can one make in markets like Dothan, AL?? Do we really think buyers who buy Scottsbluff, NE (#197, pop 15k) are really happy? I’m sure the phones are ringing off the hook for their local sales teams. Best of luck.
Rachel Martin says:
September 1, 2015 at 3:12 pm
I don’t think a rep firm is excited to loose 45-markets and 8-9-million in commissions? Katz has reduced employee counts, combined offices, and are essentially like many other rep firms…busting their backside to make up the difference. How many times has a rep firm brought a new piece of business to the table that they truly cultivated and planted the seed? The business is different. 90% of the business is purely based on price…it’s transactional. I assume makegoods will be done directly with the agency cutting down on the middle-man. The result will be seen by the buyers as better service. No going back and forth to clear spots. Since Gray mentioned 25% of their stations already go direct, I would think any business person only makes the move if it was working well in those markets. It’s the top 90-markets that would have a more difficult time. 10-years ago the thought of a tv or radio station not going with Nielsen would have been thought of as insane. Stations are still moving forward without them. This will work with very little bumps in the road. There is always someone who goes first…
Albert Pica says:
September 1, 2015 at 4:36 pm
You hit the nail on the head with all of this.