Corona outbreak: Force Majeure and the tussle in India's TV industry

The IBF president wrote a letter urging agencies to maintain the "sanctity" of their contracts. The ISA chairman replied saying that IBF's intervention was "unwarranted".

Have you heard, or read, about ‘Force Majeure’? You must have, as it is making headlines almost every day lately. In fact, Google Trends show that the search for this term is at an all-time high.

Force Majeure means extraordinary events, or circumstances, that are beyond human control – an act of God, like a natural calamity or war or riots. It does not include negligence or wrongdoing, (predictable) seasonal rain, and any other events specifically excluded in the clause. A Force Majeure in the contract frees both the parties from contractual liability, or obligation, when (they are) prevented from fulfilling their obligations by such events.

The Reserve Bank of India (RBI) announced a three-month moratorium on term loans on February 19, 2020. The real estate sector has urged the Ministry of Finance to invoke Force Majeure clause in the sector, and other industries are also contemplating the same. So, where does the television industry, which has also been badly hit, stand?

The three stakeholders as far as the Indian TV industry is concerned – broadcasters, advertisers and advertising agencies – are not in the same boat. If sources are to be believed then many advertisers have asked their agency partners to stop ongoing media activity, considering the global pandemic. Cola companies, automobile marketers, retail giants, e-commerce platforms have sent cancellation or postponement letters to broadcasters through their agency partners.

Since any step taken by the advertisers affects most of the broadcasters, so the agency body Indian Broadcasting Foundation (IBF) has intervened. IBF president NP Singh wrote a letter to the Advertising Agencies Association of India (AAAI) stating that it has been brought to his notice, by the IBF members (broadcasters), that agencies are sending cancellation or postponement letters to TV channels, sighting the outbreak of Coronavirus. Singh, in the letter, urges the AAAI to issue an advisory to its agency partners.

"I request agencies to maintain the sanctity of their contract, deals which are already signed between the broadcasters, agencies, and clients, including all short term deals confirmed by the issue of release order." Singh added, "IBF members shall not entertain cancellations, unless it in accordance with the cancellation policies of the respective channels."

This letter was sent to all agency heads and broadcasters. The head of one of the agencies responded to the letter, asking the AAAI to advise... The agency head went on to write that the print industry is backing the agencies by accommodating the cancellation or postponement requests, but the broadcasters are not (doing the same).

Sunil Kataria, president of Indian Society of Advertisers (ISA), found it essential to respond to Singh's letter, as he was marked in the conversation. Kataria wrote that he found IBF or Singh's intervention "unwarranted". Kataria wrote, "This is an unprecedented and arguably the toughest challenge faced by the industry since independence." He added that it is important to recognise the uniqueness of relationships between each advertiser, agency and client, considering the past "transactions, commercials, support and contracts" extended to each other. He asserted, "IBF forcing advertising agencies and advertisers to behave in a particular manner will risk this unique relationship."

The best option, Kataria said, would be to respect the individuality of each transaction, considering the Force Majeure. "It is of utmost importance at present to stay absolutely focused on mitigating the challenge and concerns around health. I, therefore, say the intervention of IBF is not only unwarranted, but also diverting the attention from more important matters of national importance, and ask IBF not to do so."

A broadcaster, who wished not to be named, believes that the IBF is well within its rights to intervene, "Industry bodies are formed to intervene and take care of the health and wellbeing of the members. The broadcast industry is dependent on advertisers and if they pull out of ongoing deals then it will result in a massive deduction of manpower. It is also important to take into account that a broadcaster, along with running its own business, contributes to the growth of production houses in the form of commissions for content."

The broadcaster added, "As far as the comparison with print is concerned, that is an industry with its back against the wall. You have major urban cities where newspaper circulation is disrupted, whereas, on the other hand, television viewership numbers are growing because most of the population is indoors."

Sunil Lulla, CEO, BARC India, along with Nielsen India, presented a report to explain the impact of COVID-19 outbreak on TV. He said, "As a country, India does not believe in hoarding, nor do we have that much money so the consumption of essential commodities will continue to happen and, therefore, I don't see a drop in advertising." Lulla added that India registered a six per cent growth in weekly TV viewing minutes post COVID-19 detection in India and the subsequent lockdown.

However, an industry expert believes this ‘poles apart’ stance between stakeholders in the TV industry is more than consumption and viewership. According to his understanding, it goes back to the time when the New Tariff Order 1 was being implemented in February 2019. The Telecom Regulatory Authority of India (TRAI) mandated that consumers must subscribe to the channels, instead of the cable operators bundling it for them. This resulted in TV households switching off channels arbitrarily, and the broadcasters were under immense pressure.

"IBF wanted BARC to stop releasing data for a limited period of time, but the advertisers and the agencies did not agree to it, and now you have broadcasters not willing to cooperate with advertisers' request. Back then, the broadcasters were really under pressure and needed cooperation and today, the advertisers are in deep trouble and they need others to cooperate," says the expert.

The broadcasters were not under advertising pressure back then. It was their distribution partners who went hard on them. If a broadcaster is able to generate good ratings, the cable operators willingly carry their channels to TV households. However, for niche ones, they charge a higher carriage fee as the demand for those channels is less. The low ratings, albeit temporary, were not helping the broadcasters while signing contract deals with the digital platform operators. And that is why they were urging for a blackout of TV viewership data.

A few broadcasters say that they have already accommodated requests for retail chains and other advertisers who had to shut shop due to the ongoing nationwide lockdown. "There are many advertisers who are trying to be opportunistic in a tough time like this. There are businesses that are witnessing a significant spike in demand, why are they sending cancellation intimations? By doing that, they are doing a disservice to the television industry in an already difficult period," opines the revenue head of a broadcast conglomerate.

An FMCG marketer argues that running an ad campaign to promote products will only damage the brand, "You can’t run an ad in which people are loitering outdoors, or where there is ‘excitement’ in this current scenario. You can’t shoot a new TVC either. The government is already promoting safety measures and too many people telling what to do will damage the cause. Though we have not asked for cancellation or postponement, we are definitely not issuing new release orders," says the marketer.

The discussion between the IBF, AAAI and ISA started before the country went on the 21-day lockdown. And, as Indians remain indoors till at least April 14, it remains to be seen if the stakeholders shake hands, or rather, considering the current scenario, simply say Namaste!