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

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

Author | Noor Fathima Warsia | Thursday, Oct 18,2007 8:41 AM

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

The Indian Broadcasting Foundation (IBF), at a general body meeting convened in Mumbai on October 17, 2007, has decided to honour all existing contracts. However, the cost input inflation surcharge of 25 per cent stays, and would be implemented on all new deals from a later date. Jawahar Goel, President, IBF, has informed that the date would be decided at the next IBF meeting that is likely to take place after Diwali.

The channels that were present in the meeting included STAR India, ZEEL, SET India, Times Broadcast, NDTV Media, Network18, National Geographic Channel, Sahara One Media and Walt Disney Television, among others.

IBF members have informed that the dual objectives of the meeting were to take stock of the members who have aligned with the surcharge decision, and to induce more transparency in the advertising transactions between agencies, channels and advertisers. IBF has stated that all members have agreed to the decision of the surcharge, and that net rates would be implemented from April 1, 2008.

Speaking on behalf of IBF, Uday Shankar, COO, STAR India, said, “All members have informed that they are in line with the decision of this surcharge. However, there are some issues and they have discussed these with us.”

The first issue Shankar enumerated was that of the existing contracts. He said that members had expressed that existing contracts should be honoured, otherwise the matter could lead to a legal hassle. The second point was that since this was the festival season, the decision to hike rates was affecting advertisers, and consequently channel-advertiser relations.

Shankar added, “We completely understand these issues. So while we are sure that we will go ahead with the decision to levy this surcharge, we are just bringing in a correction in the manner in which we execute this, and hence we have decided to honour existing contracts.”

Shankar also stressed on the issue of transparency and said that the IBF was geared to impose net rates from April 1, 2008. The implication of this would mean that the 15 per cent commission that the channels pay to agencies for the various clients that the agencies bring to the channel would not be paid from next year. The channels would instead just bill the advertisers directly for 100 per cent of the rate, and then the advertisers could pay the agreed commission to the agencies.

Raj Nayak, CEO, NDTV Media, said, “We understand that there is a need for transparency in the process, and hence we are going to impose net rates.”

Explaining further their stand on this issue, IBF members said that the fact that this was “unilaterally and arbitrarily” done was “wrong communication”. Nayak informed, “We have been speaking to the AAAI on these issues for the past 18 months and since there was nothing emerging from those meetings, we decided to take this forward.”

When queried why the IBF was not striking up a dialogue with the ISA directly on this issue, the members informed that they were speaking to individual clients. Nayak informed that clients such as TTK, Toyota and Canon had already agreed with the decision of the surcharge.

Even as IBF members informed that Canon had agreed, when contacted, Canon India had a different comment to make. Alok Bhardwaj, Vice-President, stated, “Canon has not agreed to this. I wrote to all CEOs of media companies expressing not my surprise on the increase, but the manner in which the consortium attempts to get into commercial matters. This is highly uncompetitive, a form of cartelisation and not in good taste at all.”

He added, “Every company has the right to do anything it wants. It depends on companies to accept the increase if they think we can afford it, and it is worth it. But a levy of this nature is not good practice. We actually removed the spots from the channels that were asking for a surcharge.”

The IBF meeting also divided the channels into four categories – channels that have confirmed that as per the advisory they would not accept the activity on existing deals without surcharge; channels that have sent confirmations of implementation of surcharge on new deals; channels that have confirmed that they would not take any deals from clients that have been cancelled to other channels who have implemented the surcharge; and channels that are not implementing the surcharge on existing as well as new deals.

The last rung of channels includes BBC World, DD, Walt Disney Television and Turner. Of these, BBC World, Walt Disney Television and DD have informed the IBF that they would get back to it after understanding the legalities involved in the matter.

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