Unknown to the public eye, the Incredible India campaign bid has triggered a row of sorts, says Bhupesh Bhandari.
On December 23, the Ministry of Tourism invited bids from advertising agencies and media buyers for its Incredible India campaign on the electronic media in Europe.
With agency commission down to 2-3 per cent, it isn't huge money at stake. The campaign could cost up to Rs 40 crore (Rs 400 million); so there is a crore or so to be made. But in tough times, every paisa counts. So agencies will vie with each other for this business.
Unknown to the public eye, this has triggered a row of sorts. The government, for the last few years, has first put together a media plan and then asked the agencies to buy slots.
Though the media plan is supposed to be divulged only to agencies, it finds its way out, and television channels and the print media come to know the details. This can have dire consequences. Once a media house knows it is on the buyer's list, it will never offer a discount, goes the argument.
Companies, private as well as state-owned, appoint agencies with specialists to get the best deal from the media. This they do by never disclosing the media plan and keeping it flexible.
Television channels and publications offer discounts only when they fear the campaign may go to rivals. And this is what the agencies thrive on -- they cajole, arm-twist and bully media houses by playing one against the other. It may sound unethical and crude but that is how business is done, money is saved and profits are made.
Agencies allege that thanks to the ministry's insistence on a fixed media plan, some European channels have hiked their rates steeply this time -- some have even quoted to them over twice of last year.
You can't fault them for this. It would take a fool to let such an opportunity pass. The well-publicised media plan, the agencies say, has flipped it from a buyer's market to a seller's market.
This, they say, has happened at a time when most television channels and publications in Europe have either lowered their rates or kept them steady because of the economic slowdown.
The ministry, on its part, says it is a rational and painstaking process, the right way of doing things. More important, it is transparent. There are no last-minute flip-flops. It leaves absolutely no room for an agency to cut a private deal and move the campaign to another channel or publication.
The media plan is frozen by the ministry after a detailed study of the media scenario, the impact of earlier campaigns and so on. The ministry uses its offices across the world to gauge the reach of channels and publications. And it is the job of the agencies to negotiate the best rates from the media. The lowest quote gets the business.
There is another bone of contention. Most European television channels have their representatives in India. Any Indian company or government department can buy space through them.
These people often quote higher rates -- they too have establishment costs to cover and need to make money for their shareholders. Smart Indian agencies, to cut them out of the deal, got in touch with the channels directly and got lower rates. This year, the channels have become wiser -- they have directed all the agencies to the representatives.
This means the spots could cost more this time round. The agencies scent a cartel here, though there is no proof. And the blame for this cannot be laid at the ministry's doorsteps. The process, according to officials in the tourism ministry, has even been lauded by the Chief Vigilance Commissioner.
The important question is, can the agencies still negotiate with the media? If they say they are in a bind, it exposes their weakness in the European market. Most of them work in Europe with associates, which is not the same as direct presence.
Can the European television channels afford to say no to business? It is not like India there, the market there remains soft. Agencies insist they don't have the space anymore to use such a threat.
But there is a more important question these agencies need to answer. With their commission fixed in percentage, why do they bother so much about the bill? Surely they have more to worry than how taxpayers' money is used. Or are they hurt because the media plan has clipped their wings?
This incident also shows how media buying has changed over the years. In the past, agencies got 15 per cent commission on all work. This included media buying as well as creative fees. In the last few years, the two functions have got unbundled.
Large aggregators in media-buying have brought the fees down to 2-3 per cent. In other words, the buyer, which could be a company or an arm of the government, pays much less to the agencies now, which may not be such a bad thing to happen.