FINE-TUNING THE TV MARKET: As the ITC revises its airtime sales rules, Anna Griffiths asks what effect this will have on the future of TV advertising sales

At a time of year when most TV sales people are traditionally

looking forward to spending the next few balmy months strolling up and

down a golf course with their industry mates, a distinct sense of unease

is rippling through the TV market.



In an uncertain economic climate, where the advertising boom of last

year is thrown into share relief against the gloom of this year,

calculators are being nervously thumbed as revenues, particularly for

ITV, look pretty unappetising.



As if this wasn't uncertainty enough, the Independent Television

Commission has just waded in with new rules on airtime sales that could

reshape the airtime-sales landscape for the next few years.



The ITC has revised the rules on advertising sales arrangements, putting

in place a structure for the TV market for the coming two or three

years, before the next grand debate ensues over whether ITV should be

allowed to exist as a single sales entity.



When the ITV companies Carlton and Granada took dual control of ITV last

year the spectre was raised that rival channels, such as Channel 4,

Channel 5 and Sky, should be allowed to consolidate in the name of fair

competition.



But last month the ITC decided that while smaller sales houses with a

national advertising revenue (NAR) share of less than five per cent will

be able to band together to compete effectively in a consolidating

marketplace, it would not be in advertisers' interests to allow the

bigger national channels to sell jointly. The only concession is that

GMTV can now be sold by ITV rather than being hived off as a separate

national sell.



So at a time of economic belt-tightening, the new rules could see a

fresh shake-out of TV sales arrangements. But what are the most likely

effects of the changes?



Well, thanks to the ITC's decision, ITV still rules. Despite the fact

that ITV is currently facing one of its toughest battles in the

advertising market, the latest ITC rules cap a succession of decisions

which have served to strengthen ITV's hand. First, the network was

allowed to metamorphose from three ITV franchisees into two, with the

merger of United News & Media into Granada, leaving the latter and

Carlton as the two real protagonists.



While the advertising industry looked on in horror at the inevitability

of one ITV rearing its head, it seemed that Carlton and Granada would be

an unstoppable force with almost 60 per cent of NAR between them.



Shortly afterwards, as ITV wrestled with the Independent Television

Commission about moving the news at 11pm back to 10pm, it managed to cut

a deal to gain extra minutage, which was also extended across the other

TV channels.



Ironically, the fizzling out of the dotcom advertising boom and the fact

that key advertisers such as the car, financial and consumer goods

advertisers suddenly began to get cold feet about the economy has meant

that the extra minutage is helping to drive significant deflation on

ITV.



The picture has so far not got any better, and although it is hoped that

things will pick up from September, analysts and agencies are predicting

that ITV's revenue could be down as much as 10 per cent by the end of

the year. Mindful of this, Carlton and Granada have put their

competitiveness to one side as they go beyond media agencies to lobby

creative agencies, making them aware of the advertising opportunities at

ITV. Such willingness to tout their wares and try and drum up extra

business is a far cry from the ITV of five years ago.



But as well as inviting general relief that, for now, the breaks have

been put on ITV's consolidation, the ITC's revised rules have clearly

stated that there can be no joint selling of airtime by Granada and

Carlton; the two London Channel 3 licensees cannot be sold together and,

following the Competition Commission's concerns last year about 'share

of ITV deals', these are still prohibited.



Andy Barnes, the sales director of Channel 4, seems pleased with the

over- all picture, although the ITC's comment that "these rules will be

kept under periodic review" has not dispensed with his unease about

ITV's position. "Broadly speaking it's fair - the key perspective is

that ITV is not allowed to join forces. It is also illegal to collude

and they can't do share of ITV deals. Our concerns are that the ITC has

said there would be periodic reviews - how periodic is periodic and on

what basis will that be made? To our way of thinking ITV has 59 per cent

of TV revenue - what's the number that ITV has to get down to before it

is even considering letting them get together? It shouldn't be

considered before less than 40 per cent - anyone with a share of 40 per

cent or greater will exert monopolistic practice. It would distort the

market grotesquely."



While it has been rumoured that Channel 5 has been keen to hold talks

with either Sky or Channel 4 about joint selling opportunities, Barnes

is clear that although he feels it should be allowed in principle, it's

not an avenue Channel 4 would have explored. "We (Channels 4 and 5) are

completely separate companies, with different remits. I could make a

song and dance about it, but at the moment I don't choose to. We aren't

talking to them at all. Would we do it? It would have to have been in

both our interests."



So will the TV marketplace pan out differently from the way it has

today?



Steve Platt, the sales director of Carlton, believes not. "I don't think

you will see any change at all in the short term. Channels 4, 5 and Sky

can't change. Flextech Telewest could, but I can't see who they would go

with - they have a very specialist sell. Unless someone is prepared to

get revenue guarantees, the smaller company will always be very

suspicious of knowing that they are getting their rightful share of

revenue."



Perhaps Flextech Telewest could be a potential new bedfellow for Channel

5 following the ITC's revisions. Mike Smallwood, the managing director

of business and commercial at Flextech Telewest, is enthusiastic about

the potential of getting together with another party. "We are in a

position where we could deal with any of the players outside ITV. If we

could do it in a way that could enhance shareholder value and the people

who work here, then we would look at doing it. I would expect over the

next 18 to 24 months consolidation of ownership of channels in the

multi-channel environment and an accompanying movement to redefine

sales."



So are we likely to see Flextech park its sales elsewhere? Smallwood

states: "We would want to do it with some sense of shared ownership - we

wouldn't get out of the business. We would need to consider if there is

a commonality of culture and purpose in a potential partner - would you

get a more powerful sell and could you be more influential within it? We

are considering it seriously."



If Flextech's up for play, what about Viacom? Paul Curtis, the managing

director of Viacom's sales division, Viacom Brand Solutions, points out

that at this stage the media company is unlikely to reverse its recent

decision to pull sales of the Paramount Comedy Channel and Nickelodeon

out of Sky and in-house, to be sold alongside MTV and VH1. "The reason

Viacom went the other way was the ability to offer a much greater

service to the advertiser - bringing all the channels together, being in

charge of their own destiny," Curtis explains. "It's not something we

would look at doing in the short-to-medium term because we've only just

worked out what we could do for ourselves."



So it would appear that if there is to be any change before the issue of

one ITV is revisited, it will be among the smaller players and, even

now, some are not convinced that there are many benefits in it for

them.



It would appear that ITV is split over whether there are benefits to

bringing GMTV in-house, since it is questionable whether the operation

would benefit from being split into a regional sell.



Mike Gull, GMTV's sales and marketing controller, said: "We asked the

ITC to allow us to do what we liked with our sales, so it is us who made

the request. We have the option to joint sell with other people, but

really it's a question of what we want to do. At the moment having a

dedicated sales force doesn't seem to be doing us any harm in a

difficult marketplace where we're doing rather well."



Advertisers are relieved that, for now, the number of sales points is

not set to dramatically change. Bob Wootton, ISBA's director of media

services, says: "With these revisions the worst you could see is ITV as

two, Channel 4, Channel 5, Sky and one other sales point. So there's no

consolidation into three points, which is what could have happened."



Graham Duff, the spokesman on the Future of Television on the IPA's

media policy group, observes: "The ecology of sales in this country is

reasonable - it isn't discriminatory. ITV has a lot of power but the

current split gives a reassuring balance. The individual channels sell

their wares reasonably well."



But there is an air of inevitability about ITV becoming one within the

next four years. Granada Enterprises's chief executive, Mick Desmond,

proclaimed as much at a recent TV conference and the question now is

when, not if. As soon as that begins to surface back on to the agenda,

perhaps there will be less political manoeuvring and more active

consolidation taking place among the other sales points.



THE PROTAGONISTS



STEVE PLATT - sales director, Carlton



He is seen as the tough face of ITV sales and the real driving force

behind Carlton's airtime sales. He is considered by many to be the best

salesman in the marketplace and the best candidate to head a single ITV

sales house, should it be allowed.



SIMON PARDON - sales director, Granada Enterprises



Once famously dubbed "pompous Pardon" he divides opinion as to the

strengths of his real capabilities. It is hard to see him as an equal

co-opponent to Platt if it came to a head-to-head on running a single

ITV sales operation.



ANDY BARNES - sales director, Channel 4



A well-liked figure who is heading a very strong sales team at Channel

4. Buoyed by the strength of the Channel 4 brand, he looks increasingly

like a lifer at the broadcaster. He is one of the least likely figures

to drive change in the sales marketplace.



NICK MILLIGAN - deputy chief executive, Channel 5



He used to sell Thames and has launched and run the sales operation for

Channel 5. He also worked at UK Gold. He is seen as a good all-rounder

although some buyers would question the strength of his team. He has

ambitions to strengthen his position in the market.



MARK CHIPPENDALE - deputy sales director, BSkyB



Sky has never seemed to have placed much emphasis on its ad sales

revenue, relying more on subscriptions. A quiet number two to Peter

Shea, he's a likeable bloke but not an aggressive player. Without the

will of Sky behind him he is unlikely to drive sales forward.



MARK HOWE - sales director, Flextech Telewest



Despite many years in TV sales he is not one of the big players.

However, he's working with a difficult brief of diverse brands and

within his small universe has made an impact on a tough marketplace.



PAUL CURTIS - managing director, Viacom Brand Solutions



A solid number two who is a relatively untested sales chief running a

minnow sales operation which is totally exposed in the tough TV sales

environment. It is not a great time to be establishing yourself as a

standalone sales unit.



MIKE GULL - sales and marketing controller, GMTV



Although he is number two to Clive Crouch, he is the frontman seen by

agencies. He heads a laid-back operation which is an insignificant

player in the TV market. Gull is well-liked but is unlikely to last if

the company merges its sales with either Carlton or Granada.