Did Sony Entertainment Television ditch Dentsu India in its bid to cash in on the huge success of Indian Premier League (IPL) 2008? The advertising agency alleges so. The broadcaster denies it. And the dispute looks headed for litigation.
According to Dentsu, Sony backed out of the agreement after selling almost Rs 100-crore ad inventory for IPL to the agency, 10 days after the tournament started. Dentsu insiders claimed that according to the terms of MoU, the agency had picked up 800 seconds of ad inventory on each of the 59 IPL matches, totalling 47,200 seconds, at a fixed base rate of Rs 2.1 lakh per 10 seconds. Sony directly was to sell only 1,200 seconds for every match, mainly to large sponsors (240 seconds each for five sponsors). All retail inventory for ad spots therefore passed into the hands of Dentsu, who would act as owner-aggregators of the inventory and sell the same directly or through other agencies that were part of its buying consortium, said Dentsu sources.
The trouble began about 10 days after the start of the tournament. The ratings for IPL were far higher than expected and beat Star’s Paanchvi Pass by quite a distance. The deal with Dentsu meant Sony would get no upside from the higher ratings. It allegedly chose to negate the deal with Dentsu and go ahead and pick up clients at rates higher than what Dentsu had been given.
According to Dentsu’s version of events, Sony took on Citibank as a sixth sponsor and Havells as a seventh sponsor (apart from Vodafone, Coca-Cola, Max New York Life, Godrej and Hyundai) in alleged contravention of its commitment to Dentsu not to sell beyond 1,200 seconds of ad per match to five pre-agreed sponsors. Ill-will was generated with regard to clients such as ITC which Dentsu brought in at base rate but which Sony sought to move to higher prices.
However, SET CEO Kunal Dasgupta rubbished all of Dentsu’s claims. “We were going to sign a contract with Dentsu, but the deal never materialised as the agency could not provide us with a financial guarantee for the tournament. We asked them to sign a guarantee backed by its parent company in Tokyo which they refused and the deal fell through,” Mr Dasgupta said.
This was not the first occasion when Dentsu and Sony had done such a deal. In the World Cup ‘06 (including Champions Trophy preceding that), Dentsu had under-written Rs. 500 crores of ad inventory for Sony. Despite a difficult World Cup, with many clients backing out, Dentsu supported Sony, claimed the agency insiders. The same relationship was perhaps sought to be continued into the IPL. Dentsu CEO Sandeep Goyal declined to comment.
However, ET has managed to get a copy of the MoU that was inked between the two parties. Dentsu claims that this MoU was binding as the agency had already begun selling for the tournament. A Dentsu official stated that Sony changed its mind and backed out post the ratings for IPL were out. As per agency insiders, Dentsu and Sony are currently exchanging legal notices and seem headed to litigation.
Apart from claiming monies that Sony owes Dentsu as overriding commission for IPL, which according to the MoU document is a 5% over-riding incentive on the net amount of Rs 178,500 on every 10 seconds out of the 47,200 seconds, the agency is also claiming its first right of refusal on the entire ad spots inventory on subsequent IPL seasons over the next 2 years.
6 months ago