The Hollywood Reporter says Fays, an SVP at MTV Networks, oversaw DR advertising and paid programming for Viacom’s 17 ad-supported cable networks, including MTV, VH1, Comedy Central and Nickelodeon. Fays exited the company 9/14 following an investigation into allegations of kickbacks involving millions of dollars over a period of years. He reported to Jeff Lucas, MTVN’s head of sales.
This is how these types of kickbacks would likely work: The sales exec places a large chunk of their paid programming inventory with an outside direct response agency and they resell it. Then the sales exec gets a 5% or so kickback for locking up the time at a low rate DR agency while the agency sells it for a 10% commission.
According to their sources, Fays allegedly offered discounted advertising to certain DR sellers and allegedly sought kickbacks in cash — “sometimes delivered in briefcases.”
Fays, 40, joined MTVN in 2005. In a 2007 profile, Response Magazine reported that Fays had taken an active role promoting the importance of DR to the cable TV biz, working his way up at Lifetime Networks, USA Networks and MTV Networks.
A source says that 15 months ago, DR advertisers representing $200 million in annual business with Viacom networks brought these allegations to the attention of company executives. Around the beginning of September, this person says, Viacom “locked down every single person’s computer in the ad sales department.” The company then allegedly went through staffers’ e-mails and “grabbed BlackBerrys out of people’s hands.” A company investigation is said to be ongoing.
Viacom had $8.6 billion in global revenue in fiscal 2010. A company source told THR DR advertising accounts for less than 10% of the Viacom’s ad revenue, though another source puts that number higher.
Reached on his cell phone, Fays said The Hollywood Reporter should be “very, very careful” about reporting these allegations.
RBR-TVBR observation: Who knows if this is also happening in the broadcast space since all the same agencies also work with cable networks? DR is huge today and only getting bigger, given the tough economic times and resulting issues filling inventory 24/7.