Prompt payment discounts – those 2% rate breaks once offered by media sellers – will soon be just a distant memory as the last stalwarts of the practice pull the plug at the end of this year. The Globe and Mail and the Toronto Star have served notice to media buyers and advertisers that this incentive will not be on their rate cards in 2004.

Catherine Yates, manager of communications and media relations for the Star, says like all businesses, the newspaper was looking for ways to improve its operating results, and cutting the 2% discount was a natural step to take.

‘We realized that it could have potential impact on some of our advertising partners, so we provided them with as much notice as we could. We issued the letter on the first of August and it doesn’t take effect until January.’

The Star has not been offering the prompt payment discount across the board. Yates says it only applied to recruitment advertising and national categories booked through an accredited agency.

David Chung, president of Maxxmedia in Toronto, says some clients are still availing themselves of the bonus and won’t be pleased to see it disappear. Maxxmedia clients who are prompt payers have known about the discount offered by the newspapers and have factored it into their cost structures. He adds that the Globe and the Star may regret the change.

‘We’re not happy that it’s going away because some of our clients do take advantage of it. Now it doesn’t give them an incentive to pay promptly. I think they’ll have a problem in terms of payments being extended longer than normal.’

Sandy Muir, VP marketing and advertising at the Globe and Mail, says withdrawing the prompt payment option was simply a business decision. The discounts were worthwhile years ago when interest rates were 18%, Muir says, but not with today’s rock-bottom rates.

‘Will our payments slow down? Probably a little, as agencies manage their cash flow. We know that – but it was time we moved on.’

Geoffrey Russell, director for media affairs at the U.K.-based Institute of Practitioners in Advertising, says early payment discounts are no longer common in the U.K., although some regional papers may still offer them.

Instead of asking for prompt payment discounts, Russell says British agencies are increasingly seeking to extend settlement dates to make sure they have the client’s money before paying the media owner.

But broadcasters in particular – which have not offered prompt payment discounts for years – have not loosened their strict payment arrangements.

‘The actual payment dates are held to be incredibly critical. If a television station says it wants to be paid on the 25th of the month, you have to pay on the 25th of the month – even if your client has failed to pay you – in order to continue to meet the accreditation criteria of the media owners.’

Fortunately a 30-day term is pretty much the norm here in Canada.

Jack Tomik, SVP of CanWest Media Sales, says about 30 years ago, before the consolidation of media buying, the Canadian industry was just as strict and would pull accreditation from agencies if payment were not on time.

‘But that was when there were 1,000 little agencies across the country, so prompt payment was an important part of our business,’ he says. ‘Today, with less than a dozen, it’s not as relevant.’