Most networks go ahead with 25% surcharge on ads

Most networks go ahead with 25% surcharge on ads

Most media networks are going ahead with plans to levy a 25% surcharge on TV ad rates, the subject of a spat between the Indian Broadcasting Foundation (IBF), which represents TV broadcasters, and the Indian Society of Advertisers (ISA), the apex body of advertisers in the country, according to an executive with a broadcast firm.

However, some television broadcasters are not, according to media experts familiar with the matter who did not wish to be identified.

The experts said these companies were chary of breaking contractual agreements with advertisers related to rates, or spoiling their relationships with media buyers, advertising agencies, or client companies.

“A dozen of the top media networks of the country are implementing the surcharge. The list includes Sony, Zee, Star, Sahara, MCCS (Star News), Zoom, IBN7, and Times Now. Those advertisers who have not complied will not have their ads on from tonight (Monday night)," said Paritosh Joshi, president, Star India Pvt. Ltd.

“Certain channel networks are not going to implement the surcharge at the moment because they need additional time, but they will adhere to it in the future," said Naresh Chahal, director, finance, IBF.

Meanwhile, ISA will go ahead with its scheduled meeting on Tuesday to discuss possible solutions, including taking the broadcasters to court should their spots be taken off air.

The surcharge, which would have made TV ad spots more expensive, was announced by IBF, which said the new rates would be effective 16 October, and was vehemently opposed by ISA.

The list of broadcasters and channels which the experts claim will now not levy the surcharge includes TV Today Network Ltd’s Aaj Tak, Turner International India (channels such as Cartoon Network, Pogo, etc.), ESPN Software India Pvt. Ltd, MTV, Discovery, and BBC Network. The experts add that broadcasters including Walt Disney Co. (India) Pvt. Ltd, South-based channels such as Sun TV Network and Asianet, NeoSports (which has applied for membership to the IBF recently), and Doordarshan are also considering not levying the surcharge. None of these claims could be independently verified by Mint.

“We have a printed rate card and we will be following it," said G. Krishnan, CEO, TV Today, who did not comment on the surcharge.

On 13 October, IBF issued a statement that said advertisers who agree to pay the surcharge by 6pm on Monday would get a waiver on the same for the first month. That would mean these advertisers get to advertise on these channels at the prevailing rates for most of the festive season. Mint could not ascertain whether any advertisers had signed on by this deadline.

Media buyers who did not wish to be identified said that they have been told (by broadcasters) that public sector firms, retail advertisers, and small companies that deal directly with broadcasters would not have to pay the surcharge. They added that advertisers on South Indian channels would have to start paying the surcharge only from 16 November. “I think that the arbitrariness and irrationality of the surcharge is now in full view. Why wouldn’t they want the public sector firms to bear the surcharge?," asked Bharat Patel, chairman of ISA.

However, some broadcasters insist the surcharge is needed because content costs have been rising. “Channels here are delivering greater value every year, and our cost of content is escalating way ahead of the inflation rate. On the other hand, our (ad) prices are declining. This is not a sustainable thing," said Star’s Joshi.

If broadcasters do not withdraw the surcharge, advertisers said that they would consider a range of options including reducing their ad spends on TV. “Assuming things stay the same, in the long run, we may adjust our TV budgets such that lesser spends go towards channels. I am operating on a fixed budget and I cant just hike it by 25%," said Tarun Joshi, CEO, Brandhouse Retail, S. Kumars Nationwide Ltd (SKNL). “We are very firm that we are not going to make the payment," said Abdul Khan, vice-president, marketing, Tata Teleservices Ltd, who added that the company would wait for Tuesday’s meeting to decide on its course of action.

Meanwhile, some print media executives are carefully monitoring the spat between the ISA and the IBF for possible opportunities. “The TV guys make it 25% premium, and we discount our rates by the 25%. Take your pick," said a sales executive at a leading publication. Interestingly, media buyers who have opposed the surcharge, may actually benefit from it, because an increase in ad rates would mean an increase in the commission they earn. “In our case, we would still go ahead and give correct advice to the client, irrespective of whether commissions are included or not in the surcharge," said Anupriya Acharya, president, TME, the media arm of Rediffusion DY&R Pvt. Ltd.