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Ad agencies owe Rs 11 billion to TV channels

Shuchi Bansal

It's one notification that will raise a storm in the advertising industry.

The joint working committee of the Indian Broadcasting Federation, the body of television channels, and the Advertising Agencies Association of India is sending notices to nearly 40 advertising agencies which have defaulted on payments to various television channels.

The defaulting agencies, which include some of the top players in the industry, altogether owe over Rs 7.50 billion to TV channels.

Media industry sources say that this figure is based on the reports submitted by a few channels only. The actual dues could be to the tune of 11 billion accumulated in the last three years.

The letter gives 15 days time to defaulting advertising agencies to clear their dues or to pay the penalty. If the agencies fail to pay the outstandings by August 15, the IBF members will either blacklist the agencies and stop doing business with them or withdraw the 75-day credit facility offered to the member agencies of the AAAI in the future.

"In case that happens, any agency which needs to book airtime on any of the IBF member channels will have to make advance payment for the commercial to be aired," says a source. Currently, IBF has 29 TV channels and airtime marketing companies as members including Star, Sony, Zee, Eenadu, Nimbus, UTV, etc.

But how can TV channels operate without doing business with the bigger agencies? "But what good is that business if it's not followed up by payments?" say sources.

"The situation is very serious and, therefore, the IBF has decided to take affirmative action," he adds.

Sources say that the action has been taken after a detailed exercise to find out the reasons for delayed payments.

It is learnt that when the IBF first wrote to all the defaulting agencies, they responded by saying that their clients, that is, the advertisers have not cleared their dues.

IBF then sent out letters telling the agencies that if the advertiser does not pay the agency, its commercials will not be aired.

It may be recalled that the IBF and AAAI had joined hands to sign a mutually beneficial agreement in February this year.

It entailed that the member agencies of the AAAI will get preferential treatment from the IBF member channels in terms of airtime rates and credit period.

In turn, all AAAI members will guarantee payments to channels within a specified credit period. An AAAI-IBF Working Committee was also authorised to monitor and take action on defaulting advertisers, agencies and channels.

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