EUROPEAN MEDIA: UK - Life on the home front

Structural changes, lengthy pitches, ITV Digital's collapse and the success of Big Brother III have marked out 2002 as a busy year for UK media. Jeremy Lee reports.

2002 will probably be remembered for the continued caution of the UK's media, big changes have occurred that should put the industry on a good footing for the recovery.

"This has been a year of structural change," Iain Jacob,the chief executive of Starcom Motive, says. "The previous levels of growth were unsustainable, although there will be a gentle pick up-next year."

The advertising market has driven this structural change - although it seems that the recession has bottomed out and things have started to improve.

These changes include greater efforts by the media owners to develop commercially focused content, and clients seeking a more balanced approach from the agencies leading to a more intense focus on the services the media companies deliver.

Jacob, whose holding company BCom3 was bought by Publicis this year, thinks consolidation is no longer viewed as a threat but as a necessity.

It has not been an easy year with further redundancies across the board and magazine closures. What's more, the TV market has endured a torrid time. The hangover of one of the worst advertising recessions in history and a new Barb panel has led to dramatic changes on the television landscape.

The new, and controversial, Barb panel was introduced at the start of the year and immediately produced some surprising audience data. This not only affected the TV stations but also the agencies, which were now given a new currency with which to trade. Even now, nine months after its introduction, the panel is still short of its target size, leading some to question the validity of its data.

Obviously the fortunes of the TV companies are linked to their audiences and ITV emerged as the worst hit. Carlton and Granada were already feeling the pinch of the advertising recession and this, combined with the two companies' investments in ITV Digital, put a severe strain on their coffers.

In a bid to create a unified, and therefore more slimline, ITV, Carlton and Granada embarked on secret talks to merge and seemed to have reached an agreement in March. However the talks broke down within hours of the agreement being signed and the two ITV giants remain separate.

ITV Digital remained a drain on Carlton and Granada's finances before the plug was finally pulled in May. The ITV companies then decided to focus their resources on ITV1, which had suffered from a lack of investment.

Despite the setback of ITV Digital, multi-channel TV enjoyed a successful year as well as increased viewing levels.

Channel 5 had a spectacular year with its share of the commercial TV audience up 17 per cent on 2001. Increased investment in programming has broadened the station's audience. Advertising revenue followed audiences and the channel can look forward to an even more successful year next year.

Elsewhere in TV, Channel 4 celebrated its 20th birthday by recording its first loss in its history through problems with its 4Ventures division.

4Ventures houses Channel 4's non-core interests including the pay-TV channels FilmFour and E4, both of which were hit by ITV Digital's collapse.

Mark Thompson, who finally joined the company as the chief executive in March after a prolonged period of gardening leave from the BBC, announced some radical cost-cutting measures. The head count was dramatically reduced and Thompson scaled back investment in FilmFour, Channel 4's film production arm.

Despite these measures, Thompson used the MacTaggart lecture at the Edinburgh TV Festival to ask the Government to guarantee the future of Channel 4's public service remit by asking that it fund the station should the need arise.

In terms of advertising revenue, the first half of 2002 began as the last months of 2001 finished: with year-on-year decreases. However, there were whispers of a gradual recovery in May when the World Cup lifted revenues. There have been small and steady year-on-year improvements ever since.

Jacob is optimistic that things are starting to look up across all media. "I think there will be more positive news in the media market, albeit from a relatively low base," he points out.

This year saw the unveiling of the draft Communications Bill, which allows non-European Union companies to buy into the UK media companies. All eyes are on what happens to ITV when the bill becomes law.

Media agencies have endured a year of lengthy pitches - some lasting more than six months - and these pitches have been few and far between and have tended to be on a pan-European or global basis. Some agency sources attribute this to the increasing importance of the role of auditors, who are also trying to push themselves further up the communications table by redefining themselves as media consultants. But there is doubt in some quarters whether they can deliver what they promise.

Another feature has been the predominance of the same agency groups pitching for the business. "There has been the emergence of an agency premier league.

If you look across European pitches the same agency names appear on the pitchlists," Jacob says.

Looking at the European perspective, Jacob thinks that the UK's experience in 2002 has been little different to that experienced on the continent.

"The countries across Europe have all had their ups and downs. The interesting thing is that changes in the media markets are no longer country-specific," he says.

NICK MANNING CHIEF EXECUTIVE, MANNING GOTTLIEB OMD

What is the most influential brand in your country?

Virgin has gone from one man's brainchild, to being a branded venture

capital company with great credibility. It has become the model for the

easyJet set and even Yo!. And being private, Virgin is brave enough to

take risks.

The most talked-about campaign this year?

The Club 18-30 print work (picture below). Andre and Steffi's T-Mobile

campaign has kept us amused for all the wrong reasons.

What's been the biggest surprise hit on TV this year?

The third Big Brother. Just when we thought everyone was bored with it,

it exploded again.

The must-read marketing book?

Jean-Marie Dru's latest Disruption tome.

Best media sales team?

Yahoo!, of course, and possibly Emap. Channel 5 is good, but it hasn't

got a lot to beat.

Media personality with the most column inches?

Martin Sorrell on the agency side, with his painful-sounding V-shaped

baths. Obviously Rupert Murdoch and anyone involved with Big Brother

III.

Most-feared person?

We don't have anyone that scary!

Biggest media party?

Parties have been a bit thin on the ground in the past couple of years.

Biggest single issue facing Europe's media industry?

The lack of imagination and risk-taking.

The business has become even more conservative during the downturn.

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