It is common in advertising for agencies to not pay media owners for 60-120 business days. It’s incredibly difficult for minority-owned media companies, which are often small businesses that depend on steady, timely cash flow to stay afloat.
To ease that pressure, Dentsu said Thursday it would limit payment terms to minority-owned media companies to up to 30 days in the United States.
The idea arose after Dentsu launched an economic empowerment group in May, which spoke to minority-owned businesses in the market to create more investment opportunities. A major concern for media owners was extremely long payment terms, which make it difficult for them to manage their operations and invest in their businesses and talent for growth, said Mike Law, president of Amplifi USA. , the investment arm of Dentsu.
“They expressed that the payment terms for a lot of these businesses, which tend to be smaller, can really hurt them and create a challenge with cash flow,” he explained.
Dentsu was inspired to change its payment terms by its client General Motors, which drew a similar line in the sand on payment windows for minority-owned vendors. GM, recently called out by black media mogul Byron Allen for its lackluster investments in black-owned media, has pledged to increase spending with such companies by 5% to 8% by 2025.
The initiative, which will launch on October 1, is led by Dentsu, and the agency will work closely with clients to ensure their contractual terms with media owners align with the program.
“From the beginning of our journey to build equity, we said we would not confuse activity with progress and this initiative demonstrates the conviction of our commitment to achieving meaningful progress,” said Jacki Kelley, CEO of Dentsu Americas, in a press release. “General Motors was our inspiration after pioneering this concept in early spring. Updating our payment terms for minority business partners will make it easier for them to access capital, create more content, provide more programming opportunities, and propel the growth cycle. Easing the burden of having to bear production costs is a key catalyst for creating equity in the media.
Minority media owners can apply for program eligibility through an online form. Led by Mark Prince, SVP and Head of Economic Empowerment at Dentsu, the Economic Empowerment Team will vet applicants and ensure they receive timely payments.
Black media owners have expressed support for the program, including Byron Allen, Founder and Chairman of Allen Media Group; Raúl Alarcón, Jr., CEO and President of the Spanish Broadcasting System; Don Jackson, Chairman and CEO of Central City Productions and Founder and Chairman of Steller TV Network; Chesley Maddox-Dorsey, CEO of A Wonder Media, which owns American Urban Networks Radio and Superadio; and James Winston, president of the National Association of Black Owned Broadcasters (NABOB).
“I commend Dentsu for agreeing to pay black-owned media within net 30 days,” Allen said in a statement. “One of the biggest hurdles for African American entrepreneurs is access to non-predatory capital, and this level of support will help tremendously. We are vigorously campaigning for other agencies and clients to do same.
“The idea for us to underwrite receivables for 120+ days for multi-billion dollar businesses is just straining and limiting our ability to grow,” Maddox-Dorsey told Campaign US in an interview. . “We need to reinvest our capital in debt underwriting instead of investing in our product. This frees up capital for us to expand and grow.
The program is especially critical for small media owners in small markets who often struggle to gain access to capital or credit, NABOB’s Winston said.
“This announcement from Dentsu is huge,” he said. “If we can get other agencies and advertisers on board, it can be a game-changer for minority businesses across the country.”
The program, shaped by Dentsu’s finance, media operations and global leadership teams, is part of the holding company’s overall DE&I efforts. More broadly, Dentsu is working to give diverse media owners greater access to advertisers, as well as readjusting historical media buying and measurement metrics to be more inclusive.
“[Parameters] need to be adjusted and redesigned to work better for these partners, whether it’s different metrics or branded frames,” said Dentsu’s Prince. “Part of that is training [teams to] look at different KPIs.
NABOB’s Winston added that large agencies often measure success in media by reach and scale, and issues with Nielsen’s sample size on minority audiences often prevent media owners minorities to access the investment. Maddox-Dorsey called the current tools on the market for measuring various audiences “inefficient and inaccurate.”
While both Winston and Maddox-Dorsey are happy to see the industry pay attention to the issue of equity in minority-owned media, they hope to see more action than announcements in the future.
“It speaks to intentionality,” Maddox-Dorsey said. “It’s not what you say, it’s what you do. We hope other companies that say they want to have DE&I initiatives will simply do so.