ITV companies must demonstrate the value of merger

No great surprise, then, in the arguments that ISBA and the IPA have submitted to the Competition Commission in opposition to the creation of a single ITV sales house, writes Jeremy Lee.

It goes without saying that the crux of their case rests on the concerns that one ITV sales point controlling more than 50% of TV ad revenue constitutes a monopoly, over which agencies have no control.

The ITV companies retort that the airtime market is an open and transparent one and that, anyway, station average price prevents the possibility of price fixing.

Whatever. These arguments and the subsequent fall-out from a merger have been well documented and analysed and, ultimately, it is for the civil servants and ministers to study and resolve the issue.

But away from the detail of the sales arrangements, one of the fundamental arguments submitted by Carlton and Granada in favour of their merger is the benefit it will have for viewers. And ISBA has taken an interesting view on this.

In short, Carlton and Granada argue a merged ITV will be a more fleet-of-foot organisation and its schedule would benefit from increased investment.

This isn't an unreasonable argument. While the prospect of one ITV sales house makes most agency TV directors blanche, few would disagree that a stronger ITV, which is better equipped to take on the BBC and the burgeoning multichannel arena, is a good thing.

For instance, ITV is riding high in the ratings because of increased investment and most agencies are delighted. So what if the merger goes ahead, allowing ITV to invest more in programming -- good news, surely?

Well, ISBA presents an alternative case. It has told the Competition Commission that the merger will make no difference to the quality of the programming because, under Carlton and Granada's own criteria, there will be no additional money for it to do so. In its evidence, ISBA quotes from Carlton and Granada's merger statement from last October. A merged ITV, they claimed, would benefit advertisers as it would have a greater ability to invest and maximize the value of its programming.

But ISBA points out the merger will not change the cost of programming - the only value benefits can be had from increasing the cost of advertising. And, as we all know from Granada and Carlton, the prices aren't going to go up because, as they keep saying, the merger will not increase the cost of advertising on the channel.

This puts ITV on a bit of a sticky wicket -- of course there are savings to be had from eliminating duplication of jobs, for example, but these are only fixed costs. So is this enough to justify the claims that only a merger can produce a totally reinvigorated schedule? Or will this additional investment come from increased ad rates?

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