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Now, AAAI differs with IBF on net rates

18-October-2007
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Now, AAAI differs with IBF on net rates

All’s not well between the broadcasters and ad agencies with new problems emerging. Just as the input cost inflation surcharge issue seems to be diffused for the time being with the Indian Broadcasting Foundation (IBF) deciding to defer the date of the surcharge and honour existing deals, another point that now irks the ad agencies is regarding net rates.

The IBF had decided in its meeting on October 17 that the Foundation would impose net rates from April 1, 2008. The Advertising Agencies Association of India (AAAI) has, however, stated that it does not agree with this decision. Madhukar Kamath, President, AAAI, said, “We have seen the recent IBF statement that mentions the rollback of the surcharge. However, we have seen no mention of the net rates and hence, wouldn’t want to comment on what our decision on that would be.”

“However, the AAAI has always opposed the imposition of net rates, as in our view this would amount to various problems for the AAAI members,” added Kamath. Net rates imply that the 15 per cent commission, which channels pay to agencies for the various clients that the latter bring to the channel, would not be paid. 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. The IBF believes that this would bring further transparency in the matter.

Sources informed that the net rates had also been one of the reasons why the agreement between the AAAI and IBF on certain codes of operating had not been re-signed after its termination earlier in the year. Jawahar Goel, President, IBF, said, “This contract was first made many years back, and some terms in this were too favourable to the AAAI member agencies. We have to revisit these points before we can sign it again.”

The agencies’ woes don’t end here. The IBF members had informed that they had been in conversation with the AAAI for the past 18 months on the rates issue, but nothing had come of those meetings. Replying to this, Kamath said, “The issue of surcharge never came up in any meeting. Various issues on increasing rates and growing the industry did come up and were discussed, but this came in a few meetings.”

Kamath asserted that AAAI understood that the broadcasters needed to price their product as they saw productive. He said, “It is the fundamental right of every channel to price their product, and we understand their need to do so.” It is also learnt that various members of the advertising agencies requested TAM Media Research to monitor key channels at a half-hourly basis to see the ads that were on these channels. Sources informed that agency officials discussed about the advertisers that were still on-air and what the channels’ stands were on the surcharge issue.

The IBF and the AAAI has more issues to handle regarding the decision to impose the net rates. A senior professional from a media agency commenting on this issue said, “Let the channels impose this, and then let them negotiate with the clients themselves, and do the collections themselves too.”

The IBF has its hands full, and one wonders what was the spirit that brought the broadcasters and the agencies together to take the Rs 15,000 crore ad industry to Rs 50,000 crore. We do look far from that target with these recent developments in the industry.

Also see:

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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