Advertisers-broadcasters tiff: Who will blink first?

By , agencyfaqs!, New Delhi | In Media Publishing | October 15, 2007

The battle lines are drawn and groups are formed. As D-Day (October 16, when broadcasters will start charging 25 per cent surcharge) heads closer, it will be the survival of the adamant

One picture

of the television boom is that it's a family, i.e., broadcasters, planners, advertisers and consumers, all four participants live like a traditional joint family. But like all joint families, there are tiffs and tussles about who will dictate the terms. And the latest tussle is the 'fair price' tussle.

A week ago, the IBF, an industry body representing almost all broadcasting networks within the country, including Zee, STAR, Sony, Network18 and NDTV, put forth a proposal to levy a 25 per cent surcharge on advertisements beginning October 16, citing rising input costs. In response to the IBF's "imposition of surcharge", the advertisers are now all set to boycott television unless the broadcasters budge from their "unreasonable demand".

Thus, the biggest advertisers on television in the country, including FMCG majors HUL and ITC, food giants Pepsi and Coke, communication biggies Bharti and Reliance and auto giant Maruti, might go off air. None of them are saying as much publicly, but if sources, media planners and buyers are to be believed, all the big boys might well back out till the issue is resolved.

"India has the lowest cost per television, which calls for some kind of revision of prices, but I think free play in the market should determine the price rather than broadcasters fixing it by themselves," says MPG India CEO Anita Nayyar.

Meanwhile, the broadcasters have a different story to tell. "Ad rates haven't increased, in fact they have decreased, in the past few years owing to cut-throat competition despite the fact that the number of television homes have grown considerably," says a senior official from a leading broadcaster.

According to estimates, over the last three years, cable and satellite (C&S) homes have gone up in number from 42 million to about 62 million; meanwhile, ad rates on TV channels have plummeted by 20-30 per cent, hitting them where it hurts the most.

Madison Media Group CEO Punitha Arumugam disagrees, saying, "The question here is not whether rates should be revised or not, but how they should be revised. All the parties should be part of the decision on rate revision, but instead, the broadcasters are imposing the surcharge on advertisers, resulting in uniting the advertisers as one. For the first time, all the advertisers are speaking in one voice."

Nayyar adds, "There is no question of negotiations with broadcasters, instead all should sit together and work out a fair price."

When questioned about the chances of advertisers boycotting broadcasters, both Nayyar and Arumugam accepted that if the broadcasters didn't budge from their stand, that would be the only way out. "My clients have already started their calculations and right now, that seems to be the only option," says Nayyar. Arumugam adds, "Not just my clients, but all the big advertisers will be absent from television unless some sense prevails."

The biggest winner in the spat seems to be print, which might get all the advertisements that television will lose after October 16. "Advertisers will communicate, if not through route A, then through route B," concludes Anita Nayyar.