The rot in media and entertainment

A new report by EY paints an unpleasant picture of fraud and corruption in the sector

The distribution team of a broadcaster colludes with multi-system operators and local cable operators to overcharge carriage fees, taking a cut on the amount. Ad agencies and production houses collude with talent managers, inflate talent costs and take a cut. Programming houses claim they pay bribes to get shows approved from broadcasters. Cuts on film-acquisition rights are common. And, corruption in media buying has reached another level - almost every media brand says it has bribed a planner or buyer at some point to ensure its brand is included in a plan.

Not so directly, but this is what a damning new piece of research from consulting firm EY shows. The research, released earlier this month, uses online interviews with 45 senior people to chart the course of rising fraud and corruption in the Rs 83,000-crore Indian media & entertainment (M&E) sector. (TIME TO CLEAN UP)

One could argue the sample is too small to arrive at any conclusion. Also, EY has one of the largest M&E practices among the big five consulting firms and it is particularly strong on risk advisory services. So, the report will eventually lead to more business for EY.

That would hold true if the research didn't come at a time when some heads have rolled and there is intense questioning and acknowledgement of the rot. Recently, a well known name in the media agency business, along with colleagues, was sidelined, following allegations of financial irregularity. This was while they were working on the account of one of the largest advertisers in India. And, several managers have been caught over invoicing their firms on programming, acquisition or talent costs.

Though these are isolated cases, these have led to anxiety. Therefore, the findings of the EY survey, in which 56 per cent of the respondents said there was increase in fraud through the past two years, resonate. The loss of profits or cost inflation is estimated at 5-25 per cent, a big number in a sector in which carriage fees and content costs have seen constant upward pressure. The question, then, is is this market pressure or simply poor ethics at work? And, could the sector, infamous for its poor returns, have done better?

The most common type of fraud is clearly those in which acquisition of any sort - or purchase, in the business language of the 70s - is involved. The report, which uses real-life case studies, without names, shows an unsavoury side of a sector that has otherwise been a huge hub of employment, revenues and creative buzz. If you add news media-with paid news and private treaties, the picture gets dirtier. Time to clean it up?