Local advertising companies owe as much as Dh450 million to media houses and are now seeking a combined effort with all concerned parties to find an amicable solution including discounts or extended credit period, Emirates Business has learned from industry insiders.
Confirming the news and sharing the magnitude of the problem, Joseph Ghossoub, Chief Executive Officer and President of The Holding Group, one of the leading advertising firms in the region, said: "It has been testing times for everyone since last September, when the economic crisis started to emerge all over the world and media felt the pressure, especially in the region, which was enjoying increasing support from the real estate sector.
"As a result, the advertising industry that operates on a very low margin and long credit periods mounted as much as Dh450m of credit with media houses in the Gulf. Most of the clients are not denying the payment, but extended delays are adding to this problem that is not healthy for the industry," said Ghossoub, who is leading this settlement effort on behalf of the advertising firms and conducting a dialogue with media houses that includes, newspapers and magazine publishers, radio operators and television channels.
Representing media companies, Mohamed S Almulla, Group Executive Director of Arab Media Group, is confident of finding a solution that will be acceptable by all the concerned parties.
He said: "In all businesses, cash flow management is important. Despite the current outstanding, we do feel that the market has picked up marginally in the past two months and more positive effects should been seen in the fourth quarter. For the collection of old outstandings, we believe, that advertising agencies and clients have come together on payment terms and conditions for settling this issue, which would help the media houses."
AMG is a publisher of three daily newspapers and operates radio and TV stations in the country.
Almulla hinted at offering extended credit as opposed to discounts that advertisers are expecting to resolve the issue.
"Profit margins in media are low. Therefore, offering discounts is not in favour of either media firms nor advertising agencies.
"Reasonably extending the credit period could be an option as long as the outstandings are addressed on a per client basis," he said.
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