MEDIA FORUM: Should more TV sales divisions merge?

Are we heading for a duopoly and should media buyers be worried about a non-ITV sales house?

When Carlton and Granada were given the go-ahead to create one ITV airtime sales operation, it was almost inevitable that the regulations covering the rest of the market would be loosened up too. And so it has come to pass.

Or so you'd think. Actually, although the Ofcom press release claims that this latest move completes the new regulatory framework for TV airtime trading, there are still as many questions as answers. For instance, although the non-ITV sales points will be allowed to combine, an investigation will be triggered if the market share of the resulting sales house exceeds the notional Office of Fair Trading limit of 25 per cent. (Channel 4 currently has 20 per cent, Sky is on 18 per cent and five is on 8 per cent.)

Not only that - Ofcom also announced that it now reserves the right to investigate a (non-ITV) sales house that commands less than 25 per cent of the market.

So, should we assume that in reality, nothing has really changed? Bob Wootton, the director of media and advertising of ISBA, says it's too early to say definitively. But one thing's for sure - ISBA will continue to oppose further consolidation on the sales side. He comments: "If there were just two sales points the situation would certainly be open to potential abuse. So how would it be regulated? Would we have to have another Contract Rights Renewal remedy for the non-ITV side of the market? Terrestrial television is compelled to sell all its airtime. Satellite channels are not. How can those two situations be reconciled in one sales operation?"

Good questions. The one exception ISBA would make would be if Scottish Media Group (which owns STV and Grampian) or Ulster wanted to come out of the ITV sales house and link up with someone else.

Are advertisers right, though, to be worried about how a non-ITV sales house, in theory, might behave? Andy Barnes, the sales director of Channel 4, doesn't think so. But he also warns that industry speculation could be premature: "The (non-ITV) broadcasters are very different companies with very different interests and nobody is going to get involved in a sales house that doesn't push their interests. The notion that they will instantly fall together into a new sales company is quite frankly nonsensical."

And like many in the marketplace, Barnes points out that there are fundamentally ridiculous aspects to much of what we've seen recently. Some industry wags were even speculating last week on whether Channel 4 could be referred for its existing 20 per cent share of the market, never mind its share if it joined forces with anyone else.

But Jim Marshall, the chairman of the IPA's media futures group, says we shouldn't lose sight of the most important truth here - if a new sales house came into being, conditional selling is a distinct threat. In theory, conditional selling has always been outlawed - and the new Ofcom statement reinforces that position. Marshall, however, says that in reality these fine words are irrelevant.

Negotiations just naturally evolve in certain ways when a seller has a portfolio of different product lines. "Buyers and sellers will naturally explore all sorts of permutations in chasing the best deal," he points out. On the other hand, he agrees with the rest of the analysis pursued by Barnes.

He states: "I think that some combination of non-ITV channels is almost inevitable on the sales side but there will be some broadcasters who would not want to see their airtime packaged up and sold as a commodity in package. That will be the concern of Channel 4 particularly but also Sky and five too. If you allow your product to become a numerical commodity, it may ultimately devalue the better parts of your product. They wouldn't want to lose their independent identities. I also don't think that any of them particularly wants to go through an Ofcom investigation."

Mick Perry, the chairman of Magna Global UK, says that when the ITV merger situation was evolving, his biggest single concern was what the knock-on effect would be in the rest of the market - and whether we'd end up with an effective duopoly. Now, though, he's reasonably confident it's not going to happen. He explains: "For a start it's not in Channel 4's interest because Channel 4 is a unique proposition. Joining a sales house would be about cutting some costs and twisting arms but it would not be about making a more convincing sell. They would only do it if they had no alternative but I'm not convinced they'll feel sufficiently threatened by ITV."

Bob Wootton: "So much has happened recently that we all need time to absorb it all. But ISBA's position has remained consistent throughout - we will continue to oppose further consolidation in the airtime market. If we are looking at an end game where effectively there are only two sales points for the television market that would not be good news for advertisers."

Andy Barnes: "I don't see why (in theory, a non-ITV sales house) should work against the interests of buyers. Conditional selling has never been allowed. Bundling is allowed obviously - but only where it's in the interests of both buyers and sellers. That's standard business practice. You expect to get a better price if you buy two of something as opposed to one of something."

Jim Marshall: "When it comes down to it, it will be a commercial decision and if CRR become ineffective then ITV will have a disproportionate power in the marketplace and the others will be forced to combine as a defensive measure. That would be sad for the channels themselves as well as for the buying community."

Mick Perry: "I'm not convinced it (a non-ITV sales house) is in anyone's interest. They might be forced into it if ITV became completely dominant but I'm not convinced that will happen. In fact, I think the CRR conditions that are now in place will actually put the non-ITV stations in a stronger position."

- "ISBA's position has remained consistent throughout - we will continue to oppose further consolidation in the airtime market. If effectively there were only two sales points for the TV market, that would not be good news for advertisers." - Bob Wootton director of media and advertising, ISBA

- "I don't see why, in theory, a non-ITV sales house should work against the interests of buyers. Conditional selling has never been allowed. Bundling is allowed obviously , but only where it's in the interests of both buyers and sellers. That's standard business practice." - Andy Barnes sales director, Channel 4

- "It will be a commercial decision and if CRR becomes ineffective, then ITV will have a disproportionate power in the market and the others will be forced to combine as a defensive measure. That would be sad for the channels as well as for the buying community." - Jim Marshall chairman, IPA media futures group

- "I'm not convinced it (a non-ITV sales house) is in anyone's interest. They might be forced into it if ITV became completely dominant but I'm not convinced that will happen. I think the CRR conditions now in place will put non-ITV stations in a stronger position." - Mick Perry chairman, Magna Global UK.

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