Advertisers threaten to boycott TV over ad-rate hike

MUMBAI: Next time you switch on your television set, be prepared for a break — in commercial breaks.

That’s because advertisers may boycott channels following the Indian Broadcasting Foundation’s (IBF) proposal to levy a 25% surcharge on advertisements citing rising input costs.

Industry sources said the biggest adspenders on air, including Hindustan Unilever, Procter & Gamble, Reliance ADAG, Bharti Airtel, Maruti Suzuki, Coca-Cola, PepsiCo, General Motors may order a halt to their commercials, though none of this could be confirmed.

Not a single advertiser of the many that DNA Money called up was willing to come on quote.

IBF is an industry body represented by almost all broadcast networks in the country, including India’s biggest — Zee, Star, Sony, Network18 and NDTV.
(Zee is half-owner of Diligent Media Corporation, which publishes the DNA  newspaper.)

Media planning and buying agencies are currently playing the mediator between the advertisers and the broadcasters, and are trying to bring about a solution.

Shashi Sinha, CEO of Lodestar Universal, which is a media buying and planning agency, said, there are plenty of rumours flying around at present.

“At the end of the day all three of us — advertisers, agencies and broadcasters — are in it together. I’m  sure a solution will be found.”

C D Mitra, president, Optimum Media Solutions, another media buying and planning agency, said media agencies and advertisers have received letters from TV channels wanting to implement the surcharge w.e.f October 16.

“It will be incorrect to say that we have received letters from all the 200 channels that exists on C&S (cable and satellite) today. But there are enough and more advertisers planning to boycott all channels demanding the surcharge. However I have no knowledge on when the boycott begins and and for how long it will stay,” Mitra said.

An IBF official said they were forced to raise the prices since input costs have risen substantially. This includes the cost of programming and transportation, artiste fees, costs involved in procuring news, movies, and so on.”

Kunal Dasgupta, CEO, Sony Entertainment Television, remains unfazed by the challenge by advertisers.

He said he hasn’t received any notification from advertisers declaring the boycott. “However, if it happens then it will open opportunity for others to build brands,” Dasgupta said.

A Star Network official, who didn’t want to be quoted, said, “The broadcasters’ demand is justified. The number of C&S homes has increased from 42 million to roughly 62 million. However, due to extreme competition and clutter in the last three years, ad rates on television channels actually went down by 20-30%, thereby hitting the channels’ bottomline. Moreover, the 25% surcharge is on MRP, which is the ‘agreed deal outlet’ and not on the actual rate card..”

For example, if somebody has been paying Rs 10 for a 10 second spot - then the surcharge will be on that rate and not on the pricing given in rate card.

“The actual rate card is at least 40% higher than MRP. On the other hand, broadcasters should also accept that due to contractual obligations with advertisers it is difficult to implement such a surcharge at short notice,” the Star official said.

Broadcasters were forced to take such as desperate step because they have been waiting for the correction to happen for the last three years.

“We will start canceling spots post October 16 for all those advertisers who are not willing to pay the surcharge. And I am sure all channels will hold their court this time till the end,” he said.
The move has drawn reaction from other quarters too.