Advertisers and agencies are bracing themselves for a hardening of
ITV’s ad rates following the Government’s decision last week to allow
ITV’s ownership structure to contract from three big companies to
The decision by the trade and industry secretary, Stephen Byers, to
allow two ITV companies to merge met with widespread disappointment from
the advertising industry.
The advertiser body ISBA, which had lobbied against any consolidation,
warned that the decision will lead to increases in the cost of
advertising ’and therefore have a profound negative impact on the many
companies operating in the UK consumer economy’.
Ian Twinn, ISBA’s director of public affairs, said: ’Consolidation
within ITV will increase costs and present a barrier to advertising and
the DTI’s decision will therefore impact on the health of the consumer
The IPA has echoed this concern. Jim Marshall, the chief executive of
MediaVest and the IPA’s spokesman on the future of television, points
out that while there are three main ITV players, advertisers have more
power to negotiate because they can, feasibly, exclude one player from
their airtime deal. ’Allowing just two ITV companies makes it very
difficult for us to use that threat of exclusion. A duopoly also means
that there’s a real opportunity for collusion between the two remaining
sales houses,’ he said.
Martin Bowley, the chief executive of Carlton Sales, countered such
comments. ’There are plenty of alternatives to ITV in advertising terms
and the fact that the two London licences must be split between
companies will ensure ferocious competition within ITV,’ he said.
Both ISBA and the IPA argue that the Government owes a ’duty of care’ to
UK advertisers as well as to the broadcasters and viewers, and that in
giving a green light to consolidation without more stringent controls on
airtime sales, the Government has failed to fulfil that duty.
Byers has decided that two of the big three ITV companies (Carlton,
United News & Media, and Granada) can merge, dismantling the 1994
voluntary agreements imposing a limit of 25 per cent of TV revenue that
can be controlled by any one ITV company. The rule stipulating that no
company can control more than 15 per cent of the total audience is set
down in the Broadcasting Act, however, and remains in place.
Byers has also ruled that no company can control more than two of the
four ITV regions most attractive to advertisers: Carlton, Central, LWT
and Meridian. This means than the original plan to merge Carlton and
United - which sparked the Government review when it was announced at
the end of last year - will now require the disposal of Meridian.
For this reason, Carlton is now considering whether to push ahead with
the merger and, if so, on what terms. Without Meridian, United brings
only Anglia and HTV to the party, together with its 35 per cent stake in
Channel 5 and its Express Newspapers - not nearly such an attractive
Meanwhile, Granada announced months ago that it would mount a bid for
either Carlton or United if the Government decided to allow
consolidation. Following the successful flotation of its media assets
earlier this month, Granada’s chief executive, Charles Allen, is now
sitting pretty atop a pounds 2 billion cash pile, putting him in the
enviable position of being free to pursue either bid, or to make a play
for Meridian if the Carlton/United deal goes ahead.
Yet it is also possible that any Carlton/United combine might decide to
seek an alternative buyer for Meridian in an attempt to weaken Granada’s
position within ITV.
If it looks for a deal with Carlton, Granada will be forced to sell
either the Carlton licence or the LWT licence (no one company can
control both London weekday and weekend licences under the terms of the
Broadcasting Act). However, if Granada doesn’t make a move for Carlton
now it would face a stronger Carlton when the time comes for the battle
for sole ownership of ITV.
Speculation has also centred on whether Carlton/United could seek an
alliance with RTL, which shares ownership of Channel 5 with United (65
per cent and 35 per cent respectively). However, RTL is also rumoured to
be considering making a bid for United itself.
As the financiers run the calculator over all the possible permutations,
advertisers will no doubt be looking at the negotiating muscle of their
media buying companies.
THE ITV PLAYERS
Company Share of TV Share of TV
viewing (%) advertising (%)
LWT 1.9 7.5
Granada 3.8 6.4
Yorkshire TV 4.7 6.6
total share 10.4 20.5
Carlton 2.7 9.7
Central 4.5 10.1
West Country 0.8 1.3
total share 8.0 21.1
HTV 2.2 3.5
Meridian 2.4 7.0
Anglia 1.8 4.3
total ITV share 6.4 14.8
Channel 5 (35% stake) 2.8 2.0
total group share 9.2 16.8
Scottish Media 2.4 3.7
Source: ITC and GS Research estimates