By Rina Chandran
© Reuters Limited
MUMBAI, Oct 15 (Reuters) – A 25 percent surcharge on Indian television advertising rates has broadcasters and advertisers at loggerheads, with no solution in sight the day before the premium is slated to be introduced and talk the matter could go to court.
The Indian Broadcasting Federation (IBF) wants the levy on ad rates from Oct. 16, which coincides with the peak festival season when advertisers launch new campaigns, and says clients that have not signed by Monday evening will have their commercials pulled.
Advertisers, who typically work out tariffs with individual broadcasters, say the increase is ad hoc and the timing unfair.
“Media rates should be negotiated and decided by an advertiser and its agency with the media house concerned, and no third party or industrial association has any role to play,” the Indian Society of Advertisers said in a statement.
“We have advised all our members to reject any demand by any broadcaster to implement IBF guided rate increases but rather, to be guided by the merits/demerits of individual broadcasters.”
Atul Phadnis, chief executive of consultancy Media e2e, said the 25 percent surcharge would not address the underlying problem — the model used to determine viewership and its changes — and said broadcasters stood to lose a lot.
“For now, broadcasters have a perishable inventory of air time and advertisers have targets to meet, so if they don’t reach an agreement, it will be a big blow to broadcasters, as advertisers will simply look to other media,” he said.
But the IBF — which represents most large networks including News Corp’s Star India, Zee Entertainment Enterprises , Sun TV , New Delhi Television and Television Eighteen — is sticking to its guns.
“Our costs have gone up significantly, and we are reaching more audiences than before, which is not reflected in our rates,” said Jawahar Goel, president of IBF.
“Discussions are going on, and I hear some advertisers have said they are going to court,” he said.
LUCRATIVE MARKET
Advertising spending in India, boosted by robust economic growth, is forecast to rise by a fifth to $4.4 billion this year.
The cost of a 30-second spot on prime-time TV ranges from about 200,000-600,000 rupees ($5,100-$15,300) on top networks.
India, the world’s third-biggest cable TV market, is forecast to become Asia’s most lucrative pay TV market by 2015.
But average revenue per user (ARPU) per month from about 73 million cable homes is just $3.50, among the lowest in Asia, according to research firm Media Partners Asia in Hong Kong.
Ads account for about 60 percent of broadcasters’ revenues, higher than in more developed TV markets because of controls on pricing and delays in the roll-out of a national pay TV system.
“Broadcasters’ hands are tied as they can’t make consumers or operators pay for their higher costs,” said Vivek Couto, executive director at Media Partners Asia.
“For some broadcasters, the share of advertising revenue is as high as 80 percent, and growth in ARPU is taking place at a much slower pace than we’d thought,” he said. ($1=39.3 rupees)