Strict norms are on the cards for the advertisers who delay in making payments to TV broadcasters. They will now have to pay for the commercials within 60 days of the airing of the advertisement, failing which they will have to pay fine and face a possible boycott by all TV networks.
This has been agreed between the Indian Broadcasting Foundation, an apex body of broadcasters, and the Advertising Agencies Association of India, which represents over 70 per cent of TV advertisers in India and has over 120 members represented by leading advertising agencies and broadcasters.
These two bodies together are responsible for handling advertisements worth over Rs 5,500 crore (Rs 55 billion) on various TV channels. The new agreement will be valid till March 2010, and is aimed at bringing in more accountability in the financial dealings between the two sides.
"According to the new agreement, we have mutually agreed to bring down the credit period for advertisers from 85 days to 60 days and an initial financial penalty of 18 per cent for late payments and a possible boycott of such advertisers," Jawahar Goel, president, IBF, recently told Business Standard.
The new agreement also abolishes third-party monitoring of financial and other disputes between the two sides. Instead, the disputes will be resolved by a joint working committee with equal representation from broadcasters and advertising agencies.
"The new agreement came into effect on March 27 and is important for us because it helps us improve. While the AAAI will be accountable for actions of its clients, the IBF will take responsibility for all its member broadcasters," said Madhukar Kamat, president, AAAI, and the MD and chief executive of Mudra Communications Pvt Ltd.
According to the industry practice, advertising agencies, including media planning and buying agencies, place advertisements of their clients (advertisers) on the channels by buying spots (one spot is 10 seconds of air time) for a small fee called agency commission. These agencies are responsible for making payments to broadcasters on behalf of their clients.
The IBF-AAAI association dates back to 2001 and was formed to codify the business relationship between the members of the two bodies. But with increased frequency of late payments by some advertisers, several broadcasters initiated a direct contact with advertisers instead of going through the alliance.
