News

Jan 11 - 2010

Firms lose staff while waiting to be paid

Dubai, January11, 2010: Unpaid advertising bills, mainly from major developers, are causing media companies to lose staff because they cannot pay them on time.

The advertising industry, which enjoyed more than 40 per cent annual growth in the boom, was among the hardest hit when property companies fell on hard times.

The latest victim is Media Week, the trade publication that was one of the most outspoken voices about the issue of late payments throughout the industry’s bumpy times last year.

Last week, the magazine’s four editorial staff and several other journalists at its sister publications walked away from their jobs because their pay cheques were several months late, informed sources said.

The resignations at Media Week illustrate how the media industry has been affected by the financial difficulties of developers in Dubai.

Emirates Neon Group (ENG), which owns Media Week and a range of print, television and mobile divisions, as well as an outdoor advertising business, was badly affected when property companies stopped paying bills.

“It’s a very difficult market situation,” Mike Orlov, the publishing director of ENG, told the website AdNation Middle East.

“A very high number of companies are owed a great deal of money by their customers, which has led to problems with companies meeting their requirements and ENG, amongst many other businesses, has suffered.”

ENG is far from alone. Several media companies have told The National they are facing increasing difficulties in being paid for the work they have done for projects.

None feels confident of obtaining enforcement orders through legal action and most are relying on ne-gotiation and personal relationships with the companies to obtain partial payment.

The sensitivity of these negotiations means few are willing to speak openly.

Late payments reached a level last year where the UAE chapter of the International Advertising Asso-ciation (IAA) began holding discussions in the spring with a number of media owners and agencies.

Ghassan Harfouche, the treasurer of the UAE chapter, told Media Week in May that the IAA’s best estimate for the amount owned to the industry was “almost certainly as high as US$150 million (Dh550.8m)”.

Eddie Moutran, the chairman and chief executive of Memac Ogilvy in the MENA region, complained of unpaid bills at an IAA forum in early November.

“Receivables are a huge problem,” Mr Moutran said. “And there is a bigger problem with bad debts. We are not talking about the normal debts where the agency can put some money aside at the end of the year to deal with this. We are talking about the bad debts that could drive you to bankruptcy.”

ENG is optimistic that in the long run it will recoup most of what it is owed.A manager at the group with knowledge of the talks between ENG and its debtors said payment problems began in September 2008, the same time many other companies say they first met challenges in being paid