Sony, Zee blink on service tax issue, Star stands firm

MUMBAI: When reports started circulating on Wednesday that chinks were appearing in the "united stand" of broadcasters to hold firm on the issue of who should pay the 5 per cent service tax on ad billings, it was surprisingly national broadcaster Doordarshan that first was cited as breaking ranks.

Yesterday the "power of one" prevailed as FMCG behemoth Hindustan Lever Ltd (HLL) had its way on the issue with all the broadcasters, with only Star India continuing to hold out.

Star had also pulled off Pepsi and Colgate advertisements over the issue. At the time of posting, however, informationavailable with indicate that while the standoff continued between Star and HLL and Colgate, Pepsi had agreed to the lead broadcaster's terms and the deal is expected to be signed today.

HLL's power comes from an annual Rs 1.5 billion TV ad spend that is streets ahead of any other advertiser. By blacking out HLL, Star TV is losing Rs 2 million every day, CNBC India has reported.

Still, Star does not look like backing down in the immediate term at least. It's line of reasoning being that the effective rates that HLL pays out are far lower than other advertisers due to the size of its adspend so for it to ask for the adjustment on the service tax as well is unacceptable.

There is an argument going round that with the Champions Trophy kick-off on 12 September, ad spend would anyway be heading towards Set MAX so Star is unlikely to be able to sustain its boycott. This however, does not look like being a factor in the negotiations as neither HLL nor Colgate are big advertisers for sports events.

What will make the difference in the end is whether HLL's threat that putting similar monies behind a group of other channels will give it the same effective reach is carried through.

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