British tabloid The Sun set aside almost $10 million for advertising rebates last year
The Sun made provisions for £8.1 million ($9.9 million) in rebates and discounts to pass on to advertisers and agencies at the end of the financial year, according to documents filed to Companies House last week.
The accounts also reveal that the company had initially set aside £5.8 million ($7.1 million) for rebates in 2015 - an underestimate, according to Campaign.A source told Campaign the unexpected larger rebate payout led to the company needing to reduce its turnover and profit by £2.3 million ($2.8 million) in its restated 2015 accounts.
Here's how News Group Newspapers describes its rebate provision:
Sister company Times Newspapers disclosed in its filings that it too pays rebates to advertisers, but the company did not provide details on how much it had set aside for 2016. The Times owner also had to reduce its profit and revenue - by £2.4 million ($2.9 million) - in its restated accounts.
The two Murdoch newspapers follow The Guardian and The Daily Mail in disclosing their rebate payouts.
The Daily Mail and General Trust said it had set aside £26.5 million ($34.9 million) in cash and discounts
Despite being commonplace in the UK, media companies have only recently begun publicly disclosing that they pay rebates due to new accounting rules that came into effect last year , which were designed to offer greater transparency around companies' assets and liabilities.Rebates are contentious because some marketers believe any media owner bonus (which can include cash or free ad space) that has been built up due to their level of advertising spend should be returned back to them - not their media-buying agency.
Some marketers are also wary that their media agency could be persuaded to spend more of their money with a certain media owner because they offer the better rebate, rather than spending in their best interests. And there is also a concern that media agencies may build up lots of free advertising space - known as value banks or value pots - and then sell that space back to their clients, rather than passing it back for free.
All of these issues were compounded in the US (which is not a rebate market) this summer when an explosive report commissioned by the Association of National Advertisers alleged non-transparent business practices were "pervasive" in the US ad buying ecosystem. The report was condemned by all of the big advertising agency holding groups , which denied wrongdoing and criticized the methodology of the study and the motives of the report's authors.
It's worth pointing out that most marketers are fine with rebates, so long as they are disclosed beforehand to all parties involved.