Strict norms are on the anvil for the advertisers who run their commercial messages on various television channels and then delay the payments to the broadcasters.
All advertisers will now have to make payments within 60 days of airing the television commercials, failing which there will be a financial penalty and a possible boycott on all television networks.
These are some of the new conditions agreed upon by the Indian Broadcasting Foundation (IBF), the apex body of broadcasters, and Advertising Agencies Association of India (AAAI), a body that represents over 70 per cent of the television advertisers and has more than 120 representatives of leading advertising agencies and broadcasters. These two bodies together handle advertising budgets worth Rs 5,500 crore (Rs 55 billion).
The new two-year agreement between the two industry bodies will be valid till March 2010 and is aimed at introducing more accountability into the financial dealings of advertisers and broadcasters.
"As per the agreement, we have mutually agreed to bring down the credit period for the advertisers from 85 days to 60 days and have an initial financial penalty of 18 per cent for late payments and a possible boycott of such advertisers," Jawahar Goel, President, IBF told Business Standard recently.
The new agreement between IBF and AAAI will abolish the third-party monitoring of financials and other disputes between the advertisers and broadcasters.
Instead, a joint working committee, having an equal representation from both broadcasters and advertising agencies, will act as the nodal body for resolving all disputes between the television channels and advertisers.
"The new agreement came into effect on March 27 and is important for us because it takes our association further and helps us to improve mutually.
"While AAAI will be accountable for all the actions of its clients, IBF will take the responsibility of all its member broadcasters," Madhukar Kamat, President, AAAI and MD and Chief Executive, Mudra Communications told Business Standard.
According to the industry practice, advertising agencies such as the media planning and buying agencies place the ads of their clients (advertisers) across television channels by buying the spots (one spot is 10 seconds of air-time) for a small fee called agency commission and make the payments to broadcasters on behalf of their clients.