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It was ‘blackout Wednesday’ for TV channels, with a spat between broadcasters and advertising agencies over how ads are billed leading to an unprecedented blackout of ads on TV channels.
Some of the leading broadcasters such as Star, Zee, Sony, and TV18 aired very few or no ads on Wednesday.
The dispute is over switching from gross to net billing. Broadcasters so far issued gross bills to advertising agencies, which included the 15 per cent commission charged by the advertising agency.
However, TV broadcasters’ body Indian Broadcasting Foundation (IBF) had been negotiating with agencies to do transactions on the basis of net bills, generated after deducting agency commission.
The move came after the Income-Tax Department pulled up several broadcasters over non-payment of tax deducted at source (TDS) on the commission charged by the agency.
With agencies and broadcasters failing to reach a consensus, IBF Secretary-General Shailash Shah said that broadcasters have no other alternative but to send net bills to agencies to sort out tax issues.
Channels such as Star Plus carried tickers which said, “Ads are not running on this channel because advertising agencies have refused to accept revisions in billing methods which are seen as flawed by tax authorities…”
Star India COO Sanjay Gupta said the group’s channels were only carrying the ads of four or five advertisers, whose agencies have agreed to net billing.
A senior industry executive said channels could lose up to Rs 30-40 crore a day till the issue is sorted out.
Advertising agencies say broadcasters cannot take a unilateral decision.
Unilateral decision
“I think this issue can be settled through a dialogue process. Advertising agencies have long-term contracts on gross billing basis with broadcasters and, therefore, such an unilateral decision is breach of the contract. For any change in an established process there should be considerable time for migration to the new system,” said Srinivasan K. Swamy Chairman, RK Swamy BBDO.
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