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IBF–ISA row: IBF honouring existing deals – correction or back off?

18-October-2007
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IBF–ISA row: IBF honouring existing deals – correction or back off?

The Indian Broadcast Foundation (IBF) has taken the decision to honour existing deals and defer the date of levying the surcharge on the cost input inflation. Industry observers state that with this move, in the IBF and the Indian Society of Advertisers (ISA) standoff in the surcharge issue, the IBF has blinked first, and in that sense, has backed off from this proposal.

The IBF members have decided to honour existing deals as a way to correct the implementation of the surcharge levy. However, when spoken to, various members from the advertisers and advertising agencies stated that this was a withdrawal of the surcharge proposal per se.

The new date to levy this surcharge would be decided soon, but some murmurs from inside the IBF offices put it at January 1, 2008. ISA’s President, Bharat Patel, is of the opinion that there was no meaning of a surcharge in new deals. He said, “New deals are new prices anyways, which would be decided at the time when new deals are signed and would be based on the negotiations between the broadcaster and advertiser and agreeing to the exchange in value.”

He added, “The IBF statement says that they have rolled back the surcharge and we welcome this decision. We are glad that our partners, the media houses, saw it fit to see that business doesn’t suffer. I must reiterate that the ISA, in principal, will oppose reneging of contracts, and industry associations deciding on pricing.”

A senior advertiser explained, “This issue is now dying out and we want it to die out as soon as, and as quietly as, possible. As far as we are concerned, this move means that they have rolled back the surcharge, and if they are saying that they would impose it at a later date, we would see then what has to be done.”

Another senior member of the broadcast fraternity, on the condition of anonymity, said, “The IBF took the decision on October 5, made it known on October 8 and the day of implementation was October 16. To add to it, they imposed this even on the existing deals. Given our current situation, where TV as a medium is de-growing, this is a much needed move, but we haven’t handled it well.”

Following their meeting, the IBF members had explained that the evidence of the TV medium being under-priced was seen in the average ad rates, which across all channels, including GECs like STAR India, stands at Rs 2,500 per 10 seconds. The IBF members had said that the industry structure at present was such that media agencies, and to an extent some advertisers, were only focussing on drumming down the rates.

The IBF members had drawn attention to the fact that cost of the broadcast industry was growing drastically. SET India’s Rohit Gupta had said, “People cost, content cost, acquisitions cost, marketing cost and distribution costs – everything is increasing. But the channels ad rates are not growing in that pace. We need serious correction.”

On this point, another member of the advertiser fraternity said, “Just take a look at their balance sheets, and what they are telling to their investors. It’s not like they are a sick industry that needs urgent support. They just have been misguided by some of the members there, and there are enough and more individual broadcasters who have come to us independently expressing that they didn’t agree with this surcharge to begin with. Let them run the channels without the ads – let’s see how that happens even for a week.”

It did happen for a day at least. STAR India, SET India, ZEEL, Sahara One Media, NDTV, Network-18 and Times Global Broadcasting are some of the networks that had blacked out ads on October 16 and 17. Raj Nayak, CEO, NDTV Media, said, “We took the loss and even if it was for a day, we have shown solidarity and set a precedent. The surcharge would be imposed, if not today then later, but it would happen.”

Many industry observers just term the whole ordeal as “bizarre” – a move that was not well thought of and which led the broadcasters to go back on what they initiated – even if it was going back in parts. All industry members state that this is not a war of any kind and that they want to get back to business as usual.

Also Read: IBF-ISA row: IBF decides to honour existing contracts; surcharge levy to stay

IBF-ISA row: Advertisers’ body may take legal recourse in input cost inflation surcharge case

Member broadcasters, advertisers for input cost inflation surcharge, says IBF

ISA, IBF lock horns over 25 pc input cost surcharge on TV ad rates

IBF imposes input cost inflation surcharge to offset uneconomic growth

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