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"It's our equivalent of Contract Rights Renewal," one press director said last week when faced with trading proposals from Times Newspapers and The Independent.

The launch of compact editions of The Times and The Independent has involved discussions, at times heated, between media owners and agencies on the formulae that should be put in place to cover charges for advertising running in titles.

Things came to a head last week when The Independent, ahead of last Saturday's launch of its Independent on Saturday compact, toured agencies with proposals that it would increase prices by 12.5 per cent on the back of its compact launch. Just as controversially, it is suggesting a formula that will involve advertisers paying 70 per cent of the rate of a full page in the broadsheet for a full page in the compact.

Times Newspapers is also visiting agencies with a formula. As 20 per cent of its total sale stems from the compact edition, it is proposing a 5 per cent cut in rates across the board to offer some discount because compact pages are smaller. However, agencies seem perturbed on two points.

First, that the level of this discount isn't high enough and second that the three-month deal proposed by The Times isn't flexible enough. Some argue that The Times' formula should allow them at least 11 per cent discount (based on the number of column inches lost in compact ads) but The Times feels able to counter that 5 per cent is fair due to the supposed greater impact of a full page in a compact.

Even some press buyers are willing to concede this. One says: "There's no research out there that proves a broadsheet is more effective than a tabloid. It's arguably better to have a tabloid page because people tend to fold a broadsheet."

However, others take the view that The Independent's 30 per cent discount on a full page is not enough. Some of this opposition seems to stem from agencies not expecting such a proactive approach from the relatively small Independent. "It doesn't have the clout of The Sun or the Daily Mail, so how dare it behave in this way?" the argument of some agencies runs.

Other press directors are more understanding. One says: "I can understand why The Independent is coming in asking for more: it has proved the compact has improved its circulation base."

The Independent's year-on-year circulation rose by 13 per cent in December to 205,303. The Times' first month of publishing a compact edition resulted in a 2.3 per cent rise on the November circulation to 636,331.

Lawrie Procter, The Independent's commercial director, has been leading its roadshow around agencies. He argues that most agencies have been positive: "The launch of the compacts has expanded the market. We're selling more, The Times is selling more and there is an acceptance from media buyers that the compacts are a good thing. There have been accusations in the past, partly justified, of a lack of innovation."

The Independent on Saturday has gone totally compact so, it argues, it is justified in taking its new pricing system out to the market.

However, Paul Thomas, the press director at MindShare, believes that The Independent on Saturday will provide the greatest difficulties going forward. Because the ABC circulation figures do not strip out Saturday figures from the rest of the week, it is hard for advertisers to know what they're paying for, he argues.

"I need the figures broken down," Thomas says. "I need the Saturday circulation, to know what the right percentage of discount is."

Thomas feels that the situation may become more straightforward with The Times compact: "The Times has tried to offer a way forward, with a formula that can be adjusted as the compact becomes a large part of circulation."

However, Claudine Collins, the press director at MediaCom, can see some problems ahead. "It is still early days, but I understand why they felt something needed to be done now. Every week, the percentage of compacts sold goes up and generally The Times and The Independent are gaining circulation.

However, columnage is being lost on large sizes and I don't necessarily agree with what has been suggested so far. Also, the market could significantly change if The Guardian and Telegraph launch compacts, so the dynamics are shifting all the time."

A belief also exists that The Independent and The Times have been over-zealous in attempting to obtain revenue from advertisers to support the new launches when the benefits are aimed at readers. Mark Gallagher, the head of press at Manning Gottlieb OMD, says: "It's a bit early to start to ask advertisers to pay more when all this is about is increasing circulation and cover price revenues."

Neither The Times or The Independent is allowing agencies to buy the broadsheet or compact audience separately. This is not causing too much concern at the moment but if, as tipped by some, The Times' audience is 50 per cent compact by the summer, problems may arise.

Collins says: "A year down the line, if they've all gone compact, it will be simpler. The problem is when, say, The Times has 50 per cent of its readers buying the compact, it could be a very different audience from its broadsheet."

For the time being, agencies are concerned that advertisers are footing the bill for the compact experiment. Some haven't yet agreed to The Times' or The Independent's demands and there is a prospect of some agencies not taking full-page ads in the titles. However, as with TV trading, a solution is likely to evolve over the coming months.