Financial Times -Harry Jayawardena tries his hand at media, advertising

Sri Lanka’s business dynamo Harry Jayawardena – whose fingers are in the pie of a gamut of economic activities ranging from alcohol, leisure, banking, farming, milk food to insurance and telecommunications – has now ventured into the media.

Jayawardena, who triggers controversy whenever he steps into a new field of investment or buyout, has got the advertising industry worried with lucrative accounts being lost with the setting up of Spendour Media which will handle media buying and also creative work for his string of companies.

“Through the new company all Jayawardena controlled public and private firm media budgets are linked and the 15 percent agency fee to all the advertising firms are saved,” an industry source said adding that this is a huge cost saving to all the companies, but a major punch to all the agencies who had Jayawardena controlled company accounts.

The industry is reeling under what they stand to lose like Sri Lanka Insurance (roughly Rs 200 million ad spend), HNB (around Rs 200 million) and others like Distilleries, Lanka Milk Foods or Aitken Spence with media spends of around Rs 40 million each.That’s not their only worry.

Apparently the new company is offering far-above-market rate packages for staff and looking to grab the best.

The source said that Splendour Media sells the consolidated media budgets to a media buying company called Media Factory, which in turn buys media space from the media. “The selling power of media budgets is through bulk selling and Jayawardena has been very strategic in this regard,” a Jayawardena company source, who declined to be named, said.

Ad industry sources are also raising ethical issues in the tactics employed by Jayawardena in the media-buying strategy. “Unrelated companies have different media budgets and while it is true that all the budgets pooled together will fetch more advantages such as bonus adverts on a television channel for an example, it might not be very ethical to allocate those extra adverts to Jayawardena’s private companies, which were in fact based on the public quoted company budget allocations,” an ad source said.

He said all benefits from public quoted companies should be enjoyed by these companies and their shareholders and if not it raises issues of not informing shareholders and unethical practices.

Industry sources said in some cases, Jayawardena – who often gets directly involved in negotiations unlike many company chairmen – has offered a percentage of the commission to ad agencies in lieu for taking away the account from them.

The reduced commission issue also stirred a controversy some years back when some agencies resorted to this – against established practices – in getting new business.