IBF, ISA row: Uneasy lull after the storm

By , agencyfaqs!, New Delhi | In Media Publishing | October 19, 2007
IBF, by announcing the rollback, might have lost the war but it's clearly geared for the second phase of the battle. It has brought to fore the core issues related to escalating input costs. However, at present advertisers are more than happy

Is it a

rollback? Or is it just a breather? Indian Broadcasting Foundation's (IBF) decision to defer the levy of a surcharge on advertisers till fresh contracts are etched has got the smiles back on the faces of advertisers. Even if the market sees it as round one to the advertisers, no one is betting that the war is over.

Members of the IBF have come on record to say that the industry body representing TV channels will reconsider the levy of a surcharge on new deals effective January 1, 2008. Talk of some sort of surcharge (the original demand was for 25 per cent) for all new contracts is still in the air.

An emboldened Indian Society of Advertisers (ISA) appears unperturbed now that existing contracts will not be breached. Its stand: In future, when the contracts fade out, fresh negotiations will take place; but it rules out a surcharge per se.

Bharat Patel
Bharat Patel, chairman, Procter & Gamble India, and chairman of the ISA, says, "Advertisers are glad that such an arbitrary surcharge has been rolled back. We are now looking forward to working together. Our stand remains the same: that there is no question of a surcharge being levied on fresh contracts. There shall be re-negotiations and discussions on the issues raised by the IBF… Henceforth, we will expect advertisers to be more strict with broadcasters while working on individual contracts."

A senior spokesperson at HUL reiterates Patel's stand, but in a circumspect manner: "Advertisers are happy that advertising is back on air. At this moment, it is difficult to speculate about the future. Legal issues are going to exist as well."

Rohit Gupta
And what about broadcasters? Says Rohit Gupta, president, network sales, SET, "The moot question is how to proceed from this juncture. There will be a discussion on the issues at the extraordinary general meeting called by IBF. It will make attempts to address the issue of fair value for advertising inventory. However, it's clear that, at this point, the 25 per cent increase in prices is advisory and may not be applied by the entire fraternity. Smaller players have to be taken into account as well."

Clearly, constructive dialogue is the way forward. And the stage is being set for a second round of negotiations.

Says Shyam Shanker, president, India Media Exchange, "We are glad that IBF has backed down and now doors for further discussions have been opened. The three parties now need to sit together and analyse the facts behind the issues such as the cost of inflation, and a constructive dialogue seems to be on the way. IBF raised an issue and that has been brought to light."

Media agencies cannot be ruled out. Says Sundar Raman, managing director, Northern and Eastern regions, MindShare, "Advertisers and media agencies have been fairly consistent in their stand. IBF is now talking of fair value, advertisers are not denying them that right. Also, I think the role that media agencies play in providing value to advertisers cannot be undermined. IBF cannot in any way directly create a unilateral rule that they will deal directly with advertisers."

Sundar is referring to reports that IBF would apply net rates to all new contracts beginning April 2008.

IBF will also have to deal with dissonance among its ranks; some channels wrote to advertisers accepting ad deals without the surcharge. Says Siddharth Jain, vice-president, distribution and business operations, India and South Asia, Turner India, "Turner was not in a position to implement the IBF recommendation… the terms of our existing contracts do not let us unilaterally increase the rates negotiated under those contracts and, more significantly for us, our corporate standards do not allow us to consider participating in the recommended action, in respect of existing and immediate future business."

That said, IBF has brought certain issues to light in a rather effective manner. 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 has grown considerably. Whether there is a Round 2 or not, that point has certainly hit home.

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