Daily Mail discloses £24m cost of advertising discounts and rebates

Daily Mail: consumer arm ad revenue grew 4% in last financial year
Daily Mail: consumer arm ad revenue grew 4% in last financial year

Rebates are common in UK but practice is rarely discussed openly.

The publisher of the Daily Mail and MailOnline gave advertising "contract discounts and rebates" worth £24m to media agencies and clients during its last financial year.

Daily Mail and General Trust’s annual report shows the sum was "charged" during the 12-month period to September 2019 – up about 1% on £23.8m in the previous year.

DMGT’s consumer publishing arm, which also owns Metro and bought i in November, increased ad revenue by 4% to £329.6m as growth at MailOnline and DailyMailTV in the US offset print decline.

Digital brought in £145.1m of ad sales and print £184.5m.

Hypothetically, the £24.1m worth of contract discounts and rebates was equivalent to about 7% of annual ad sales, although the accounts made no mention of that.

The annual report said: "The consumer media segment enters into agreements with advertising agencies and certain clients, which are subject to a minimum spend and typically include a commitment to deliver rebates to the agency or client based on the level of agency spend over the contract period."

A spokesman for DMGT declined further comment.

Campaign first revealed in December 2015 that DMGT had made an annual provision for advertising discounts and rebates in its accounts.

Rebates are common in UK advertising, but the practice of media owners making such payments to agencies in return for agreed volumes of spend is rarely discussed openly.

Big agency groups have come under scrutiny, particularly in the US, amid questions of transparency about whether they are disclosing rebates to their clients.

A small but growing number of UK publishers have followed DMGT’s lead by reporting the existence of rebates in their accounts, although they have tended to give no numbers.

Campaign reported in October 2019 that Telegraph Media Group had disclosed rebates for the first time in its accounts.

Guardian Media Group and two News UK subsidiaries, Times Newspapers and News Group Newspapers, the owner of The Sun, made similar admissions in their respective 2016 accounts.

DMGT publishes more detailed accounts than some of its rivals because it is listed on the UK stock market. 

Greater openness

Stephen Broderick, chief executive of FirmDecisions, a contract compliance company that advises advertisers on their deals with agencies, said greater openness about rebates will be good for the media industry.

"Rebates – or ‘benefits’, as they are now more widely known – are not a new thing within the UK market. They are widely acknowledged and this story is simply indicative of market trading dynamics," Broderick said.

"What is crucial is that advertisers are made aware that benefits do not just come in the form of cash any more. Advertisers need contractual clauses that cover them for other iterations, including free [advertising] space, but also newer ones such as value pots or service-level agreements.

"The technical language used is constantly shifting and evolving and, in order to curtail issues before they happen, it is vital advertisers know that and adapt their contracts accordingly."

Another industry source said "anyone who doesn’t know about rebates must be living under a rock" after the transparency debate of recent years, but suggested some clients might lack the appetite to look closely at the issue because of its complexity.

Some agencies, particularly in the independent sector, say they will not accept rebates on principle as they want to improve transparency and trust.

"If we get given free space or a cash rebate, we will give it back to the client," Peter Thomson, co-founder of The Press Business, a specialist press planning and buying shop, said in November 2019 when he launched the agency with Steve Goodman, former managing director of print trading at Group M.

Discounts and rebates can sometimes apply over long periods that go beyond a 12-month or annual period.

DMGT’s provision for discounts and rebates showed that it had £29.1m in "current liabilities" at the end of its financial year.

That is an indication of the discounts and rebates that the company expects to settle in the forthcoming year and beyond, according to an observer familiar with accounting practices.

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