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ISA, IBF lock horns over 25 pc input cost surcharge on TV ad rates

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ISA, IBF lock horns over 25 pc input cost surcharge on TV ad rates

The Indian Society of Advertisers (ISA) and the Indian Broadcasting Foundation (IBF) are in the midst of a row over the latter’s proposal to levy an input cost surcharge of 25 per cent on TV media rates, which would come into effect from October 16, 2007. The IBF, following a meeting on October 5, took this decision, subsequent to which, IBF members sent letters to agencies informing them of this rate hike that would be applicable on all existing and new deals for all channels.

Reacting to this move, the ISA lamented the fact that IBF had collectively, unilaterally and arbitrarily taken such a decision. Rahul Welde, GM, Media Services, HUL, said, “We do not support any unilateral action by any channel. We have rejected the levy of any such surcharge and believe that bilateral arrangements that we have with all the channels will prevail.”

Bharat V Patel, Chairman, ISA, said, “We heard about this from the media, and from letters sent out to agencies. I also got in touch with the World Federation of Advertisers on this, and they informed me that there has been no instance of such a move anywhere in any industry globally, and they don’t even expect it. We are surprised by this move.”

He further said, “Not only is such a move unprofessional, but also illegal, it being a restrictive trade policy.”

The IBF, on the other hand, is clear that such a move is cost corrective, and about due now. Jawahar Goel, President, IBF, explained, “Some advertisers even have a problem in paying our current rates – we have to put them on advance payments. I don’t think consumers are ever happy about paying, especially if they are used to paying a certain rate. However, this is necessary for the growth of the television industry in India.”

“In the last six years, cost per million of the TV industry has devalued by 66 per cent, making it one of the cheapest mediums in India. The rates of outdoors were increased a month back by almost three times, no one had a problem then,” Goel pointed out.

ISA questioned that if the economics of the medium were so unviable, why had new players entered the domain? Patel asked, “INX Media and NDTV Imagine are just some of the players who are entering this field – why would they do this if there were no revenues in the medium?”

Bringing the broadcasters’ point of view, Goel said, “The Government had levied a service tax on all broadcasters a few years back, and at that time, the ISA wrote to its members directing them not to pay this tax. We are still recovering from some of these moves, and we have to initiate the right action if we have to work for the better of the industry.”

Welde added here, “We do not understand how anyone can renege on existing contracts, and more so when all rates, merits and issues are discussed during the negotiations. We will continue to engage with the individual channels as in the past.”

On the one hand, Goel is clear that the IBF would stand by its decision to levy this input cost surcharge, on the other hand, the ISA is clear that they will not agree to this. ISA has advised all its members to reject any demand to implement IBF guided rate increases and instead be guided by the merits of individual broadcasters while deciding rates.

The matter appears to be in a stalemate of sorts at present. Whether this means some advertisers would withdraw their ads from channels, or members of both organisations would agree to at least honour the current contracts, is still a wait and watch. It is also learnt that some quarters are contemplating taking the matter to court.

However, it still remains to be seen whether senior members of the industry, who have seen the IBF and ISA work together in the past, would let this happen, and more importantly, if the industry would mutually benefit from all this.

Also Read:

IBF imposes input cost inflation surcharge to offset uneconomic growth


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