70 per cent of India's agencies are not part of any industry association. Who then protects small to mid-sized agencies?
The industrialist from Lucknow defaulted on a Rs. 10 crore media agency bill and the matter went to court. The 'powerful' MNC media agency argued that while approved/signed bills were being dishonoured, the promoter continued to fly his own helicopter between Lucknow and Delhi. The defence argued that the company had gone to BIFR and that this was a genuine case of a company having 'gone sick'. The Honorable High Court not only exempted the company from paying its dues, but also asked media owners not to blacklist it, allowing it to restart its marketing/advertising activities.
Interestingly, we never really hear about the countless others who folded up after a major bad debt.
I co-founded a media agency after nearly two decades in the MNC agency ecosystem. People of my vintage have seen payment delays and defaults. Large agencies have all the resources they need to fight large corporations (advertisers), namely, large finance teams, corporate lawyers, INS/IBF/DD/AIR/AAAI memberships/accreditations.
As an entrepreneur, I see the vulnerabilities and resource constraints of small agencies.
The question here is - Who protects the agency?
The Industry Association?
How well represented are the hundreds of advertising, PR, event, activation, media, research and digital agencies in this country? Sure it's a long tail after the top 10-15 networked agencies. But every agency needs to be a member of an industry body that can help with - representation with clients/marketers' industry associations, representation with the Government/lawmakers, updates about the latest regulations that affect them (like GST workshops) and with best practices by instituting awards.
Typical hurdles mid and small sized agencies face include - huge number of pitches at zero cost, advice is mostly not paid for as the norm is to get paid for getting the ad 'published', pitch ideas used without permission and predatory pricing by bigger agencies to win business. Moreover, the media enjoys clout as no TDS is deducted on media payments. However, clients deduct TDS before paying agencies and agencies 'fund' media payments at the outset - getting TDS refunds after over 12 months. Another problem is that of delayed payments.
A Cottage Industry?
Here are a couple of real examples of battles fought by a 10-year old Delhi based accredited creative agency.
1. The client was a large, reputed firm with major business enterprises in the NCR. The amount involved was Rs 90 lakh payable to media for ads released by the agency. When the client declined to pay despite acknowledging the liability, the agency went to an industry association. They were told no help can be extended, as they were not a member. The media industry association agreed to ban the client provided the agency paid up first. The agency paid media its dues and went to court to recover the money, a large sum. Luckily, they won the case in two years. However, despite the assurance of the media industry association that the client would not be allowed to advertise, the client managed to release ads (on advance payment basis) in the interim.
2. Another reputed NCR based firm was the client. The agency had a signed contract, estimates were approved, ads released. The client disputed media rates at the time of billing. The agency did not have an industry association to go to; the media industry association made it clear it was an issue between client and agency. Ultimately, the agency got short-paid after three months.
We must not forget the good work done by media industry associations for their member organisations. The IBF routinely reaches out to the individual TV viewer for their feedback on content, pricing, etc. Both the INS and the IBF play a crucial role in ensuring media payments are made within the stipulated credit period. As effective industry associations, they end up helping ad/media agencies too. For example, financial due diligence of an advertiser (on the issue of extending credit) is a joint effort for the INS/IBF and the agency.
However, these are industry bodies for publishers/broadcasters - they have been created to look after the interests and concerns of their members, first. To reiterate, who protects the agency?
A look at non-media industries...
In a recent Supreme Court judgment, The Institute of Chartered Accountants of India (ICAI, a statutory body created by an Act of Parliament in 1949) was allowed to take disciplinary action against one of its members, for bringing disrepute to the profession, even though the specific event occurred outside the CA's professional zone. The ICAI says a CA can't be caught driving drunk, even though that's his personal matter. It stops short of saying 'a CA can do no wrong'.
By upholding the highest standards of governance and legal jurisprudence, the ICAI is also one of India's most respected institutions that provides counsel to the Government, other industry bodies and corporates.
Now let's look at the Indian Medical Association (IMA). Created to take care of the interests of doctors as well as the well being of the community at large, the IMA has branches across the country (29 states/ Union Territories) and is headquartered in Delhi. The IMA's objectives are - to promote and advance medical science, improve public health and medical education, maintain the honour and dignity of the medical profession and help achieve equality among all members of the profession.
The IMA along with the Medical Council of India (MCI) ensures adherence to the standards expected from a certified medical practitioner. It also is the go-to body for complainants.
Can we bring back the glory?
If over 1.1 crore businesses (including small retail outlets) could be registered under the new GST law, why can't a few thousand agencies -creative, media, market research, digital, PR, event, activation- be registered with an industry association that stands up for its members? If agencies are the key intermediaries that we all need, protecting their financial and business interests is in everyone's interest.
Is the AAAI listening?
Note: The figure in the introduction (70 per cent) is a guesstimate by the author basis empirical data among small/mid-size agencies.
(The author is co-founder and managing director, Mediant Communications, a new-age media and communications agency)