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Dentsu inks Rs 500-cr deal with SET India for Champions Trophy and ICC World Cup 2007

11-September-2006
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Dentsu inks Rs 500-cr deal with SET India for Champions Trophy and ICC World Cup 2007

The industry has been abuzz with the unexpected and unprecedented pact between Sony Entertainment Television (SET) and Dentsu India, which sees the latter taking a significant position in the forthcoming ICC tournaments – ICC Champions Trophy and ICC World Cup 2007. Even as the ink on the contract is still drying, the industry has already raised a few questions.

SET India holds the telecast rights of these series.

Both SET India and Dentsu India are very tight-lipped on what the specifications of the contract are. However, according to industry sources, Dentsu India has blocked a significant amount of ad inventories on these matches for a special rate and has in return signed an underwriting contract of Rs 500 crore with SET. The contract would imply that if SET India earns anything lower than the mentioned sum of Rs 500 crore from these matches, Dentsu would make good the remainder.

This puts Dentsu in an unusual position of being the custodian of the client’s money and the media owner’s money. How would the agency balance the act? Dentsu officials aren’t offering any comments right now.

Nonetheless, speaking on the deal, Rohit Gupta, SET India’s EVP, Sales and Revenue Management, said, “We believe that this deal brings a fresh strategy in sale of properties as premium as the ICC tournaments. Everyone wants to be on such properties but the commercial space is limited, so you have to take an early position in such matches.”

When asked on the nature of the deal, he said, “I am not going to speak on the commercial terms. All I can say is that this is win-win situation for both us. They have access to our inventory, but this is in addition to our own selling of sponsorships and ad space. In fact, we have already almost closed six out of eight sponsors on both these events. As usual, 10 per cent of the inventories have been kept aside to be sold closer to the matches, but all put together, there really isn’t much left.”

However, the industry doesn’t seem very pleased with the deal. One point leaders are speaking of is that a deal like this encourages ‘agency rates’. Some of the other concerns that come into play here would be whether Dentsu can approach non-Dentsu clients and who would be defined as Dentsu clients – advertisers they have been appointed agency of or anyone who can strike a deal with them, whether the agency can sell ad rates lower than what Sony would be selling, and so on.

The Joint Working Committee (JWC), which has members from the Advertising Agencies Association of India (AAAI) and the Indian Broadcast Foundation (IBF), has been working on cleaning the industry of the ‘agency rate’ syndrome, which they view to be detrimental to both advertiser and agency interests.

When asked if this deal was violating the IBF Code, Srinivasan K Swamy, President, AAAI, said, “We have word from both Dentsu and Sony and they state that media reports on the deal aren’t accurate. They have agreed to meet us and we will have further clarity then. We aren’t saying that there can’t be any deals. There can be deals, just as long as they aren’t attacking any codes.”

When asked how the IBF and AAAI members had reacted to this deal, Swamy replied, “If what has been reported is true, then we are all clear that this is in violation of the IBF agreement. However, it has been told to us that whatever has been reported isn’t true and, therefore, we have to wait to really know if there is a problem here at all.”

In case a violation of the code is established, the JWC will decide the future course of action. Giving an indication though, Swamy informed, “If anybody has violated the IBF Code and if the violation is strong enough, we could recommend the association to suspend the member – that is the extreme step which we would take only and only if absolutely required and I must reiterate that isn’t even in the reckoning now.”

It may be noted here that Dentsu Tokyo functions on a structure where media selling is a part of the business model. Has Dentsu India taken inspiration? One really doesn’t know. Nonetheless, a week from now it would be interesting to see how one of the biggest deals in the history of Indian sports shapes up and the impact it would create on the market.

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