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IndustrySpeak: Why did the IBF surcharge not take off on October 16, 2007?

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IndustrySpeak: Why did the IBF surcharge not take off on October 16, 2007?

As far as business transactions are concerned, life in the television advertising industry has now returned to normal. Release orders (RO) are being issued as they have been, and ads spots are going on air as they were. Channel heads, agency heads, and advertisers are meeting each other, a little more than what they used to, but talking to each other nonetheless. The Indian Broadcasting Foundation (IBF) is still very clear in its intention to impose the surcharge on a later date. As the dust settles on the issue, industry leaders speak on the reasons due to which the IBF’s input cost inflation surcharge did not take off in its first attempt on the designated date of October 16, 2007.

Anisha Motwani, Marketing Head of General Motors, puts it simply. She said, “My personal view is that the manner in which the surcharge was thrust on everyone was the first barrier to its acceptance. Somehow, we never got into evaluating its merits and demerits because of the way it was being enforced.”

Agreeing with Motwani, Nandini Dias, COO, Lodestar Universal, said, “It was a unilateral decision and did not include members of the Indian Society of Advertisers (ISA) and the Advertising Agencies Association of India (AAAI). Transactions such as these are a two-way process. How can anyone take a decision on this individually and expect others to adhere?”

Bringing the broadcasters’ view on the matter, Joy Chakraborthy, Head Revenues and President, Zee Entertainment Enterprises Ltd, said, “Firstly, the 25 per cent surcharge was just an advisory from the IBF to its members. Like most other broadcasters, ZEEL decided to implement the same after evaluation. Majority of the channels did implement the advisory. Some others couldn’t do it on account of their international legal contracts, and some were opportunists.”

He added, “It is not a question of failing to carry forward the surcharge; the issue united all channels across the broadcast fraternity, and enabled us to understand each other’s issues, concerns and businesses better. It also brought to the fore, a singular commonality in the issues faced by all broadcasters – unaccounted growth, flat prices, lack of fair value, cost inflation and so on. Zee has been performing exceedingly well and has seen four rate revisions in the last 18 months. Nonetheless, being a part of the same industry we did not want to be seen as opportunists or just safe-guarding our interests. We’ve had excellent longstanding relationships with our clients and agencies, and we continue to partner with them for mutual benefits.”

STAR India’s President-Sales, Paritosh Joshi, added here, “STAR India continues to believe that the process of sensible negotiation with all parties would establish an improved value of television inventory, which is in the common interest of all involved in the value chain. This endeavour would happen at the broadcasters at both the individual broadcaster level, and also as part of the continuing efforts of the IBF to sensitise clients and agencies about the central and critical role of television advertising in their marketing mix.”

As to why the surcharge did not take off, he replied, “We realised that several members of the IBF were constrained by strong binding contracts that precluded immediate enforcement.”

Lintas Total’s Chief Strategy Officer, Raj Gupta, said, “The issue that the broadcasters have raised is valid. However, this is not the way to operate in any industry. When there are multiple parties involved in any process, how can anyone just take a decision? In addition to that, once a contract is signed, on the basis of what would you say that you wouldn’t honour it?”

Another senior advertiser asked, “Doesn’t the manner in which this was executed look like a desperate attempt? Many advertisers would’ve seen a merit in the broadcasters’ point, but when there are obvious ways in which you can break an attempt such this, wouldn’t advertisers also protect their own interest? The manner in which this was executed would very obviously attract mass rejection – I think the question you should ask is that on the basis of what did a few broadcasters hold the entire industry to ransom, even if for a day?”

Many broadcasters and advertisers refused to comment on the issue stating that not only was the issue still sensitive, but also vested interests were not yet resting. Perhaps it is yet not clear what the future of the IBF surcharge attempt would be. Nonetheless, what cannot be refuted is that the issue is far from over.


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