What''s the spat over TV ad surcharge?

As reported earlier, leading TV channels will not get spot advertising from the midnight of Tuesday 16 October. Hindustan Unilever, Procter & Gamble, Airtel, Pepsi, Coca-Cola and Reliance Communications, among others, have directed their media-buying agencies not to book such advertisements on 16 news and entertainment channels, including NDTV, Network 18, Zee News, Star News, etc. (See: Advertisers strike back; broadcasters reduce commercials breaks on TV)

These advertisers account for over 35 per cent of the Rs7,000 crore spent on television channels annually. The decision comes after differences between broadcasters and advertisers over a demand by channels for a 25 per cent surcharge on spot advertisements - which come in as last-minute bookings to fill in unused slots.

The controversy began when the Indian Broadcasting Federation (IBF), which represents the channels, decided to drop all spot advertisements if the advertisers and their media agencies did not agree to pay the surcharge. Advertising agencies described it as an "irrational demand". The broadcasters are also believed to have instructed their advertising-sales team against accepting spot ads on their channels from any company.

Companies normally book ad space either through bulk deals or spot bookings. However, news channels sell more spot advertising than entertainment channels. A news channel typically carries 72 ten-second spots per hour; 30 to 40 per cent of which are spot ads.

IBF members and leading entertainment and news networks expect to lose advertising worth Rs12 crore a day if they drop spot advertisements. Notwithstanding this, they say that they are firm about the blackout. "We have to take a stand. For six years we have not increased our rates even when the input costs have escalated," said a TV channel representative.

The ban is only applicable to the ads placed by advertising agencies that are part of AAAI. But this covers most leading agencies. They say the main problem is that the surcharge issue was decided unilaterally."

Star India President (ad sales) Paritosh Joshi, however, said that the IBF had been discussing the issue with AAAI for one-and-a-half years. "It is AAAI that walked away from the joint working committee arrangement," he said.