Television viewers were in for a surprise on May 1, 2013 when they found almost no ads interrupting their favourite TV shows, barring some channel promotions and the odd ad now and then. This ad blackout by broadcasters is following advisories sent out by the Indian Broadcasting Foundation (IBF) to its members to shift from the current system of gross billings to net billings.
The move comes on the back of the notices sent by the Income Tax Department to broadcasters demanding tax payable on the 15 per cent difference between what broadcasters bill and their net realisation. Consequently, starting with the April billing cycle, broadcasters have started sending bills to ad agencies on net amounts. Ads that are associated with gross billings have been discontinued.
Star Plus and its other sister channels have been running a ticker that states: “Advertisements are not running on this channel because advertising agencies have refused to accept revisions in billing methods which are seen as flawed by tax authorities. We regret any inconvenience, but the STAR Group is committed to doing business with the highest standards of compliance, which reflects the true commercial arrangement between advertisers and broadcasters.”
Talking exclusively to exchange4media, Uday Shankar, CEO, STAR India said, “It is difficult to indicate for how many days this blackout will last. But it will continue till the billing discrepancy is sorted out. We are losing 90 per cent of our ad revenues every day. All the brands that have not agreed to net billing have been dropped.”
Gross billings have been followed by the industry for the last 15 years. But around a month back, some broadcasters received notices from the Income Tax Department stating that they were not providing Tax Deducted at Source (TDS) on 15 per cent agency commissions in their billings.
However, the IBF believes that this 15 per cent is a “fictitious” figure and hence, was not included in the transactions.
Even as viewers are getting to watch their favourite shows with short and minimal ad breaks, it remains to be seen for how long the standoff between the broadcasters and the advertisers will remain and what solution is worked out, as the per day revenue loss is mammoth.