TV broadcasters bleed money in ad blackouts over billing
A spat between the television channels and advertising agencies over billing practices has turned costlier for the broadcasters as they may loose up to R20-25 crore everyday for taking the commercials off the air.business Updated: May 02, 2013 23:11 IST
A spat between the television channels and advertising agencies over billing practices has turned costlier for the broadcasters as they may loose up to Rs. 20-25 crore everyday for taking the commercials off the air.
"Broadcasters may loose Rs. 20-25 crore per day, which means over Rs. 100 crore if tiff continues for next five days," said a senior executive from Multi Screen Media, which runs Sony Entertainment.
Broadcasters have blacked out commercials since Wednesday in protest against a new billing method but are carrying ads for agencies that have agreed to move to the new 'net' billing method.
Earlier, broadcasters used to issue gross bills to the advertising agencies for TV commercials. These bills included a 15% charge, which was later deducted from the gross amount.
In recent assessments, the income tax (IT) department has taken a view that the 15% trade discount given by broadcasters is actually an agency commission.
I-T department has issued notices to Indian Broadcasting Foundation (IBF) members for non-payment of tax deducted at source on this 15% agency commission.
To avoid unnecessary litigation, the IBF then decided to issue net bills, which was not accepted by media agencies.
Major networks such as Star India, TV18, Viacom18, Zee Entertainment Enterprises, Sony Entertainment, Times Television Network, and ETV have joined hands to drop advertisements.
"Broadcasters are losing revenue every minute. This will hurt the finances badly," said Ashok Venkatramani, CEO, Media Content and Communications Services, a venture by ABP Ltd.
But in or a longer term, the new billing system will hit hard the revenues of media agencies as well. The commission rate is expected to dip from 15% to 3% and further down.
"Also, the proposed tax system will make clients more dominant over media agencies as they will negotiate on the percentage of commissions," said Santosh Sood, former COO, Rediffusion Y&R, an ad firm.
However, efforts are on to end the standoff.
"Discussions are on. And hopefully, we will find a solution soon," said Arvind Sharma, president, Advertising Agencies Association of India.