Wednesday, July 6, 2011

Impact of New Service Tax on OOH

In an age of increasing media fragmentation and on-demand viewership, Global offers offbeat media solutions to reach an audience. By its exclusive nature, these solutions cannot be turned off or turned out… no matter where the consumers run, there it is, forcing the target audience to co-exist with the medium… The adoption of digital technology is driving growth of the outdoor segment. Another key reason behind rapid growth of outdoor advertising is the low cost of this medium compared with the more expensive advertising mediums.

Sanjeev Gupta, CMD, Global Advertisers

Sanjeev Gupta is the Managing Director and Chief Executive Officer of Global Advertisers. He is focused on providing the strategy and vision, which allows Global Advertisers to attain its goal of being a powerful company in the region that provides brands engaging connections with their consumers. Under his leadership, Global Advertisers is building competencies in many disciplines. Prominent amongst these are financial market publicity and entertainment embedded marketing.

Apart from being responsible for the media spends of several hard task master multinational advertisers, he is also leading several OOH industry initiatives. Gupta has contributed 16 years in OOH marketing and advertising, which showcases his powerhouse performances in all sectors. He holds a graduate degree from Mumbai University.

In conversation with exchange4media’s Tasneem Limbdiwala, Gupta speaks at length about the outdoor industry’s concerns regarding the current service tax structure, the key growth trends in OOH, digital drive and more…
What are the major concerns of the outdoor advertising industry regarding the current service tax structure?
Global Advertisers has been in the industry for more than a decade now, Out-of-home has revolutionised the way outdoor communications is being looked upon by marketers. As an agency owner, I believe that the current format of Taxation Rules on service tax is a big challenge to execute. We are already working under marginal margins, additional taxes will be killing. It is not possible to raise an invoice within 14 days as indicated by the new rule, also there is no clarity on the date of completion of service. I think this rule will force the agencies to look for bank credit, which, if obtained, can go up to 20 per cent of an agency’s total revenue.

The agencies will be burdened from all ends. Everyone attached with the advertising sector will be affected, including the printers and mounters, as their bill payments will be delayed.
With the AAAI sending its representation to the Finance Minister, can we expect to see any new exception or a solution to the service tax issue?
Yes! I am quite hopeful as the members of representing committee are top honchos of advertising agencies. Sam Balsara, Vikram Sakhuja, Shashi Sinha, Ashish Bhasin and Nagesh Alai can turn the tables! I think the Government needs to understand the peculiarities of the advertising sector; it can’t be compared with an on-off service provider. We are business-to-business service providers with long-term contracts.

I think the payment of service tax on commercials released by the advertising agencies should be given extended time-frame.
In what other ways is AAAI addressing this issue?
There are around 1,000 ad agencies registered under the INS, out of which 960 run small and medium-sized operations. Smaller vendors or agencies depend completely on their payments from clients to pay their debts and taxes. Huge cash flow requirement may lead to closure of medium and small agencies. Therefore, I feel AAAI has to take an immediate action to amend, withdraw or change the PoT Rules.
What steps is the outdoor advertising industry taking to tackle the service tax issue and the anomalies arising out of it?
Of course! The health of outdoor advertising agency will be affected enormously. The Government seeks advance collection of service tax; there is no provision to adjust excess service tax collected. There is no provision for adjustments of bad debts or settlement based on re-negotiated price. The only way we can execute PoT is to collect the service tax amount in advance at the time of Campaign Confirmation Form (CCF) of deal. The CCF will specify all the details of individual campaigns executed by an agency through media sights belonging to media owners/ concessionaires (MO/C). It should not have specific expiry date, instead should have exit clauses. The CCF will mention: a) start to end date, b) site details, c) rate for each site, and d) the overall campaign spend for each campaign. Acquiring new clients will be challenging as their payment backgrounds need to clear be fore hand, also we will introduce clauses for Cancelation of Campaign, Payment Credit Period, Execution/ Operation of Campaign, Right of Rejection and PO/ Invoices/ RO & credit notes.
Now, coming to Global Advertisers, what was the vision of OAP at conceptualisation and how has the journey been so far?
When we ventured into outdoor advertising in 1994, it was restricted to hoardings. However, it has undergone a massive changeover. As the Indian consumer is bombarded with 100,000 advertisements a day on more than 350 channels, outdoor advertising has shown promise to break the clutter of advertising on traditional mediums. I started this business with my brother Rajiv, under the guidance of my father, Mr. Manmohan Gupta. He has been the source of inspiration to us. His methods of doing business are still important to me. The best thing which I inherited from him is ‘Commitment’ – while working with my dad, I used to handle the branding of MM Mithaiwala (our sister company) by giving ads in newspapers, radio, local announcements, banners and wall painting.

Both of us started exploring Mumbai for new opportunities and avenues. And, we zeroed in on Global Advertisers, the OOH agency… Since then we followed the footprints of our father and family members – business strategy, planning, execution and most importantly, maintaining the quality of work at every stage of the business. Global Advertisers – The ultimate choice in Outdoor.

Overall, it has been quite an intellectually and creatively stimulating journey – a great learning experience from ups and downs of the business and industry.
Recently, Global Advertisers have been announcing various campaigns in regards to newer opportunities and trends. Would you like to brief us the different campaigns that your company has been working on?
I believe, India has actually moved out of home. So ‘out of home’ is the place people spend more time than inside the home. This has led to almost an explosion in the development of OOH. We have created many opportunities for brands to promote their product or service effectively. In terms of reach and revenue, OOH media provides excellent mix of media tools to producers of regional films. Its cost-effectiveness has made this medium popular in Marathi and Bhojpuri film genre. I have observed that the Indian film industry is just not Bollywood, it’s far beyond it, even regional films have good budget for promotion in OOH. So, I believe OOH effectively contributes to the success of regional films at the box-office.

Even reaching out to the masses has never been so easy for any political leader. We are regularly approached by many political parties in the peak season of the Ganesh festival, Dr BR Ambedkar’s birthday or on a frequent basis to communicate their social agenda through our hoardings across Mumbai and other parts of India.

We have added new strategic sites to our OOH army: Domestic Airport 600’x8’ one-of-its-kind, prime hoarding at Bandra (40x40), strategic sites in Juhu (40x20) and Corridor Branding at Sion of five sites together are available for advertising for a single brand or a group of brands depending on the requirement. So, overall our brand value has become stronger and heavier.

I think the key growth factor would be to engage with marketers on long-term deals and give them value for their money so that they can stick with the medium. A significant trend is that current advertisers are spending more and doing longer term deals.

We have also taken an initiative to give an opportunity to young aspirants of the media industry who are eager to learn the techniques and acquire expertise in various disciplines of media and the media industry by creating on job training, part-time and freelancing working options for them.

The agency comes out in full force to support social initiatives such as Mijwan Welfare Society, IDS Awareness, Blood Donation, Terrorism, Save Tigers, Go Green, Don’t Drink and Drive, E-Waste, Save Water, Pollution and many more. As an extension of our social responsibility, we continue to support NGOs like Save the Children, Harmony Foundation, Rotary Club, ISKON, Lions Club, PETA, and Goonj for their fund raising events.
Who are your competitors and what is your USP compared to them?
I think every organisation has something or the other as their USP, Global Advertisers strives on Best Quality, Services and Rates, and that’s the reason our clients have stuck with us since inception.
What are the latest technological trends seen in the outdoor industry?
The OOH trend of brand promotion has been continuously hitting the attention of innumerable number of brand owners. From shopping malls to airports and from Metro stations to moving vehicles, promoting brand through outdoor media is quite in vogue at present.

The growing economy of the country, the induction of high-end technology (in outdoor advertising sector), the changing lifestyle of customers, and so on, mark the trend of aggressive brand promotion in India. Brand owners and advertisers involve in frantic efforts to popularise their brands through updated methods and tools of outdoor advertising. The various tools of advertising also observe tremendous change in terms of style, technique or even devices – digital screens, LCD screens at point of purchase, software/ training/ machines.

In an age of increasing media fragmentation and on-demand viewership, Global offers offbeat media solutions to reach an audience. By its exclusive nature, these solutions cannot be turned off or turned out. In fact, it can’t even be escaped, because no matter where the consumers run, there it is, forcing the target audience to co-exist with the medium.

The adoption of digital technology is driving growth of the outdoor segment. Digital outdoor technology combines the traditional strengths of outdoor with unique targeting opportunities. Another key reason behind rapid growth of outdoor advertising is the low cost of this medium compared with the more expensive advertising mediums.
What is it about the outdoor advertising industry in recent times that has you most excited?
I think brands have got immense opportunity to understand consumer behaviour in terms of brand communications through live consumer engagements in the physical space – connecting emotionally.

I am thrilled to see the new conceivable Out-of-Home areas – from live music venues to sporting arenas, retail stores and shopping centers, music festivals, food and fun fairs, transport networks, restaurants, libraries, gyms, cinemas, digital interactive hoardings and even public spaces – are all now territories where modern way of outdoor advertising is coming out quite effectively.
Please brief us on your current client portfolio? Which are the new clients that you have bagged so far in 2011?
Current Client Portfolio:
Agencies - Posterscope, OMI, O&M, RK Swamy BBDO, Ogilvy, Mudra Milestone, Bates 141, Rediffusion Y&R

Airlines and Tours & Travels- Star Cruises, Panorama Holidays, Louis Cruise, Jet Airways, Blue Ocean Cruises, Air India, Strawberi Holidays

Apparels- Seasons India, Raymond, Pagli, Provogue, Pramanik, Pantaloons, Telon, Liba’s, Levis Staruss, KKCL, Kalki, Charagh Din, Globus, Manywar

Automobiles- Toyota, Tata Motors, Solitaire, Honda, Skoda Auto, Nissan, Mercedes-Benz, Jaguar, GM, Fiat, Chevrolet Auto, Hangar, Audi, Volkswagen

Banks- Bank of India, Syndicate Bank, State Bank of India, Saraswat Bank, Saffron, Punjab National Bank, LIC, L&T Finance, Kotak Mahindra Bank, ICICI Bank, Dena Bank, Bank of Baroda, Bank of Maharashtra, Allahabad Bank, UCO Bank

Electronics -Whirlpool, Fuji Film, LG Electronics, Panasonic, Videocon, Philips

Entertainment- Star Plus, Sony, Sahara One, Nick, MTV, HBO, Adhikari Brothers, UTV, Colors, CNBC-TV18, NDTV, Zee TV

IPO- Shree Ganesh Jewellers, Prakash Steelage, Omnitech Infosolution, Neeraj Cement Structural, Mid Valley, Lotus Eye Care Hospital, Jindal Cotex Hilton Metal Forging, Goenka Diamond, DQ Entertainment, Decolight Ceramics, Career Point, Bedmutha Industries, Bank of Baroda, Avon Corporation, Austral Coke & Projects, ARSS Aqua Logistics, Varun Industries

Jewellery - Utssav CZ Gold Jewels, Shree Ganesh Jewellery, Om Jewellers, Nakshatra, Goenka Diamonds & Jewels, Gitanjali, Agni Jewels, Waman Hari Pethe

Real Estate- The Wadhwa Group, Supreme Builders, Sheth Developers, Rustomjee, Royal Palms, RNA Corp, Raheja Builders, Puranik Builders, Orbit Group, Omkar Reality & Developers, Oberoi Realty, Nirman Realtors, Neelkanth Builders, Nanak Properties, Nahar Mayfair Housing, Mantri Realty, Man Infra, Lokhandwala Constructions, Lodha, KSL & Industries, Kalpataru, K Raheja, Universal, Hirco (Hiranandani), DSK Builders, Dosti-Group, Akruti City, Ajmera Group, ACME Group, Veena Developers

Telecom- MTC, Airtel, Loop Mobile, Aircel, Vodafone, Videocon, Uninor, Reliance Communications, Idea