Media Forum: Is it time to free ITV from CRR?

As advertisers desert the network, should CRR be dropped, Alasdair Reid asks.

You can easily see why ITV's senior management is currently consumed with righteous anger. You can argue that the ad industry has just betrayed it in the most shameful way imaginable.

Advertisers continually cry out for the network to invest in the right sort of high-profile programming - and in particular to make efforts to reach affluent young men. They urge it to stay at the forefront of iconic programming strands such as drama and sports.

And yet, when ITV delivers the ultimate prize (the Fifa World Cup finals coverage, including England games), they walk away, leaving a massive hole in ITV revenues not just in June and early July but, according to projections, in August, September and the third quarter. It seems possible that ITV revenues may drop below the £100 million-a-month mark for the first time in a decade. August could be as low as £87 million.

The ad industry, some observers say, will surely pay for this act of desertion. One way or another. If the network's revenues continue to decline, its ability to make the right sorts of programming investments will diminish and its uniqueness (still much cherished by advertisers) as a provider of huge peaktime audiences will disappear.

So, ITV will argue that advertisers have, at the very least, lost their right to protection under Contract Rights Renewal, the remedy put in place to allow Granada and Carlton to merge in 2004, creating a single ITV company - and a single ITV sales point. It stops ITV abusing its position as the largest single supplier of advertising impacts.

ITV has been lobbying quietly, yet consistently, for reform or abolition of CRR for many months, but now these efforts are being ramped up. Who can blame the network for attempting to turn the World Cup disaster to its advantage? And who now can deny the validity of its case?

Gary Digby, the managing director of ITV Sales, says ITV wishes to retain a low profile on this issue, especially as it now appears that sympathies in some parts of the industry are running in the network's favour. Procter & Gamble's media chief, Bernard Balderston, for instance, revealed last week that he would now welcome a review of CRR.

Digby states: "We're clearly aware of the concerns that have been expressed about the impact of CRR by advertisers and agencies, and think that they need to be taken seriously."

He points out that if ITV is pushed into unwarranted decline, it will lose the ability to make the sorts of programmes that some advertisers rely on. But he can't comment directly on recent speculation that pressure from City investors will now make it very unlikely that ITV will be able to mount a serious bid for broadcast rights to the next big football bonanza - Euro 2008.

Perhaps understandably, given that P&G is a client, Jim Marshall, the Starcom UK chairman, says he too has some sympathy for the ITV position.

He reveals: "I don't believe that if CRR were withdrawn, everything would be fine again. On the other hand, ITV is still valued for its continuing ability to produce high-rating programmes delivering mass coverage. If it were proved that CRR was damaging its ability to do that, then we'd all be mad to let that situation continue. It would be cutting off our nose to spite our face."

But Neil Jones, the managing director of Carat UK, can't agree. He states: "Advertisers want a strong ITV and the network should have all the top programming properties, including the World Cup. But the truth is that ITV still has a massive share (of the television advertising market) and it's arguable that some of its programming budgets have not been spent in the right way. That's the real issue."

And this is a view shared by Andrew Constable, the head of media at Coors Brewers. He concludes: "The fact that ITV is suffering is a terrible shame.

Last Thursday, the nation was glued to ITV's coverage of the England versus Trinidad and Tobago game - and for ITV to have that is a great testament to its programming efforts. But CRR is something that ITV bosses said they were comfortable to have in the first place. It was a price they were willing to pay to facilitate a merger that would deliver the cost savings they said were needed. So you could argue that this is entirely a problem of ITV's own making. Let's not forget that CRR is doing a good job in protecting the interests of advertisers."

- Simon Marquis, page 13.

YES - Gary Digby, managing director, ITV Sales "The concerns expressed by advertisers and agencies should be taken seriously. ITV is the biggest commercial investor in programming in Europe. That delivers a channel of huge value to customers and we all want to sustain that."

MAYBE - Jim Marshall, chairman, Starcom UK "I'm far from convinced it would be acceptable for CRR to be dropped in its entirety because ITV continues to have a disproportionate power in the airtime marketplace, but it may be appropriate to amend its provisions."

NO - Neil Jones, managing director, Carat UK "ITV1 still takes 44 per cent of the airtime market and the ITV family of channels will take 48 per cent in 2006. That's a massive share. It needs to drop below one-third before anyone can talk about CRR going."

NO - Andrew Constable, head of media, Coors Brewers

"I can see the arguments that it may hamper ITV's ability to invest in programming. But if you got rid of CRR, would ITV guarantee that every penny saved would find its way into programming?I'm not convinced."

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