Mumbai: Recession-stricken companies are falling behind in payments to their advertising and media agencies which, in turn, are not paying dues to publishers and broadcasters. And an apex advertising body says it will send its members a watch list of firms and sectors more likely to run into payment tangles.
Among those with payment problems are names such as Tata Motors Ltd, Unitech Ltd and Subhiksha Trading Services Ltd.
Advertising agencies usually extend a 65-day credit period to companies which place advertisements through them. The liquidity crunch caused by delayed payments and defaults is proving to be a big blow to the approximately Rs20,000 crore Indian advertising industry, which makes its money from either fixed commissions or by charging a certain percentage of advertiser spending. This comes in the wake of an overall industry slowdown. A Pitch-Madison Media Advertising Outlook 2009 report released in January expects the advertising industry to grow 2% this fiscal compared with 15-20% in the previous fiscal.
Executives at the Indian Broadcasting Foundation (IBF) and the Indian Newspaper Society (INS), two apex media organizations, say they expect the mediators—advertising agencies —to clear what is due to them.
Under review: AAAI chief Madhukar Kamath says a team is examining the track record of every client. Ashesh Shah / Mint
The Advertising Agencies Association of India (AAAI) says it’s preparing a list of clients and sectors members need to watch out for when it comes to payments. Madhukar Kamath, CEO, Mudra Group, and president, AAAI, said: “The IBF-AAAI joint working committee has formed a four-member team which is examining the track record of every single client. We are fully aware of the circumstances facing various advertisers and are reviewing it case by case. But there will no extension of the credit period (currently 65 days).”
Vinod Berry, chairman of the AAAI-IBF sub-committee, says everyone has to become more careful in giving credit to clients. Berry is also senior vice-president (revenue management) at Multiscreen Media Pvt. Ltd.
Another sub-committee member says some breathing space is usually given to clients with a good payment record, adding that trouble particularly arises in sectors such as real estate, where there isn’t much of a track record to go by.
A Tata Motors spokesperson said: “Tata Motors enjoys a credit period with most channels. Some of the payments have been slightly delayed beyond the standard credit period due to certain unavoidable circumstances. The IBF and AAAI did discuss the matter, and have appreciated Tata Motors’ position.”
A Unitech spokesperson said, “We are reconciling the payables to, and receivables from, media and dues, if any, will be cleared after that by the company.”
Subhiksha is waiting for fresh funds to clear dues. R. Subramanian, managing director, said: “As covered widely in media and stated by us, we are awaiting a Rs300 crore injection to restart business and to clear salaries and other vendor dues, including some to our media partners.”
Jawahar Goel, president, IBF, and head of business at Dish TV India Ltd, said advertising agencies are the best judge of a client’s ability to pay up. In his view, the onus lies with agencies. “Clearly, there are cases of delayed payments that have come up recently and we are thinking of the course of action that’s required to address these,” said Goel, adding that embargo of defaulters is a possibility.
Sam Balsara, chairman and managing director, Madison Communications Pvt. Ltd, said: “In these times, agency heads need to be more cautious and concerned about their clients and their ability to pay, so that they can honour their commitments to the media owners.”