Economy
Hungarian government to wipe out media agencies - paper
The paper said the measure to be included in the 2016 tax package would prohibit media companies from rewarding agencies with 20-25% bonuses when they have clients advertise on their platforms. After the new regulation enters into effect, the media companies would sign contracts directly with the advertisers that would pay directly to them. The legislation is based on a similar practice currently in place in France, the paper added.
A few weeks ago it seemed the cancellation agency bonuses is not on the government’s agenda. It is unclear at this point what regulations will be applied to the three large media agencies that will win a HUF 25 billion public procurement tender and will manage billions of forints worth of advertising for the state.
This is how the bonus works
The new rules could turn the local advertising market upside down. The current practice works mostly like this:
A few weeks ago it seemed the cancellation agency bonuses is not on the government’s agenda. It is unclear at this point what regulations will be applied to the three large media agencies that will win a HUF 25 billion public procurement tender and will manage billions of forints worth of advertising for the state.
This is how the bonus works
The new rules could turn the local advertising market upside down. The current practice works mostly like this:
- the company that wants to place an advertisement assigns one of the agencies to choose the right media for them;
- the media companies, of course, want their clients to spend all their advertising budget at them;
- as an incentive, the media companies offer discounts and pay a certain percentage of the money paid for the advertisement to the agency as a bonus;
- according to the paper, the bonuses are in the area of 20-25% generally but there are cases when they reach 50%.
