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Business News/ Industry / Media/  Ads resume as channels, agencies reach compromise

Ads resume as channels, agencies reach compromise

Broadcasters had dropped commercials of advertisers that weren’t moving from a gross to a net billing system

The row saw commercials going off the air on Wednesday and Thursday. Photo: Priyanka Parashar/Mint (Priyanka Parashar/Mint)Premium
The row saw commercials going off the air on Wednesday and Thursday. Photo: Priyanka Parashar/Mint
(Priyanka Parashar/Mint)

Mumbai: Indian television channels resumed showing commercials after broadcasters and advertising agencies resolved their differences over billing, with the networks appearing to have got their way.

The dispute had led to commercials being taken off air on Wednesday and Thursday.

After prolonged negotiations on Thursday evening, the Indian Broadcasting Foundation (IBF), the Advertising Agencies Association of India (AAAI) and the Indian Society of Advertisers (ISA) arrived at a compromise formula over the billing process for the commercials carried by television channels.

“Starting 1 May 2013, media buying agencies will accept net bills from broadcasters," said a release from IBF, the apex body of major entertainment and news networks in the country.

“The agreement was signed by the representatives of the AAAI and broadcasters after the meeting that concluded close to 1am on Friday," said IBF secretary general Shailesh Shah.

Under the new process, the release orders (ROs) issued by the agencies to the broadcasters will be based on net billing. However, ROs “will contain a legend that details the gross value and clarifies that this is as per the industry practice prevailing between agencies and advertisers, and is for services agencies’ offer to advertisers", said Arvind Sharma, president of AAAI and chairman and chief executive officer (Indian subcontinent) at Leo Burnett.

Gross billing is the value of the bill, including a 15% media agency commission. Net billing is the value of the bill minus the commission.

Meanwhile, AAAI said that it plans to approach the tax authorities and ask that broadcasters be allowed not to deduct TDS (tax deducted at source) against agency commission. If they succeed in obtaining such permission, the system of gross billing will continue.

In a separate press statement, AAAI said: “AAAI continues to maintain that the tax demands made on some broadcasters are bad in law. It has committed that it will attempt to get a circular from CBDT (Central Board of Direct Taxes). A circular that clarifies that broadcasters like other media are not required to deduct TDS from agency commission since broadcasters do not pay the agency commission."

Uday Shankar, chief executive officer of Star India Pvt. Ltd, said, “If by May 31 advertising agencies get a clarification from CBDT that gross billing will not invite tax, we have said that we will continue the practice."

IBF, the lobby group of TV channels, had decided to drop ads of advertisers not shifting from the current gross billing to net billing system.

The row saw commercials going off air on Wednesday and Thursday, causing a nearly 80 crore revenue loss to the broadcast industry.

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Updated: 03 May 2013, 11:28 PM IST
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