A strange affair this one. Can a member of the BBC family really be contemplating getting into bed with ITV? Well, yes. In this media world, thinking the unthinkable is (almost) becoming routine. Actually, this is slightly less melodramatic than it seems at first sight.
A merger of this sort would just about be scandalous if we were talking some sort of Romeo and Juliet scenario. But this is more Darby and Joan in the making. The British TV business in the 21st century may well involve a vision of these two public-service flappers, ITV and the BBC, growing old disgracefully with each other - but the current proposal is rather more modest.
UKTV is currently run in a joint venture between BBC Worldwide, the BBC's commercial arm, and Flextech, the content division of Telewest. The cable company wants to concentrate on the distribution side of its business, thus paving the way for a merger with the UK's other major cable company, ntl. ITV is believed to be the front-runner to pick up the Flextech stake.
This wouldn't have much impact on UKTV as such. Its nine digital channels, many of which show BBC archive programming, have always been advertising-supported. That revenue would continue to filter back to the BBC.
But arguably more is at stake where ITV is concerned. A deal would extend not just the ITV brand but also opportunities to cross-promote. Its policy of defending (perhaps even increasing) its market share through acquisition will doubtless be applauded in the City. Its determination to focus on television and take the fight to its rivals may also be applauded by advertisers.
On the other hand, there's that old spectre of ITV dominance in the airtime market. Mark Jarvis, the head of media at Carat, can see why ITV might want to do it. He explains: "It can make more programmes and try to sell them internationally but that's risky. In any case, its real focus is on content paid for out of ad revenues and it may feel that the best way to grow is to grow its share of the advertising cake. But I don't believe that the regulators would ever allow it to sell UKTV jointly. The two sides would have to be kept separate."
And Bob Wootton, the director of media and advertising at ISBA, would go further - he remains sceptical about whether this would be a comfortable long-term strategic partnership. He states: "Yes, UKTV involves advertising sold against BBC television archive material and, yes, this would seem at even the most basic level to strengthen the ITV portfolio. But longer term, won't they be reliant on the continued goodwill of the BBC for its supply of programming?"
Over the short to medium term, though, that isn't an issue. The supply of BBC material is guaranteed by contract for another 20 years or so.
Wootton admits that the sales question would need careful monitoring but he says he has been encouraged by the effectiveness of Contract Rights Renewal as a regulatory mechanism. He also points out that ITV has not been tempted to move GMTV airtime into ITV sales since taking full control.
Will other commercial broadcasters, particularly those in the multichannel market, be more worried about ITV involvement in UKTV? Nick Bampton, the managing director of Viacom Brand Solutions, seems relatively relaxed. He believes this merely shows that ITV has woken up to the fact that in order to maintain its share of audience, it will have to start buying into alternative forms of content rather than relying upon its own programmes to win over the audience. "Content is key within this competitive space and there is only so much programming that can be spun off one existing 24-hour channel called ITV1," he says.
Bampton concedes, however, that the Competition Commission would have to take a close interest in any proposed sales arrangements.
Andy Jones, the joint managing director of Universal McCann, says he can understand why ITV sees this as an irresistible strategic proposition but that doesn't make him feel any more comfortable about the prospect. "Anything that strengthens ITV has to be a major concern," he argues. "From ITV's point of view, everyone knows they can't rely on ITV1 alone for their future prosperity, so it will see many reasons why extending its multichannel portfolio would be a good idea. But I feel that the power-base granted ITV when (Carlton and Granada) were allowed to merge is big enough as it is."
MAYBE Jarvis: "I don't think we should underestimate the notion that ITV needs to be seen to be growing the business from a strategic development point of view. A deal involving UKTV would certainly be seen as such. But actually I'm not sure how much financial advantage ITV would gain from rolling its sales up with (current) ITV sales and the regulators certainly can't be seen to be encouraging monopolistic behaviour."
NO Wootton: "ITV's share of the airtime market would obviously be a concern. But if we set that to one side for a moment, many advertisers might applaud ITV's decision to defend its market share through acquisition - but hope also that it won't distract them from their primary goal which is to deliver strong audience performance on ITV1."
YES Bampton: "A significant part of the more cost effective end of the airtime market could fall into the hands of a channel that currently leverages prices at three times the cost per impact of UKTV. As a result, the Chinese burn that advertisers are currently receiving from ITV could rapidly turn into a full Nelson."
YES Jones: "You're never going to feel relaxed about the largest sales point potentially getting a greater share of the market. And while it's true that ITV hasn't been leverage what it has recently, it certainly did so in the past and give the opportunities over the longer term it will do so again."
MAYBE - Mark Jarvis, head of media, Carat
"I'm not sure how much financial advantage ITV would gain from rolling UKTV sales up with (current) ITV sales and the regulators certainly can't be seen to be encouraging monopolistic behaviour."
YES - Bob Wootton, director of media and advertising, ISBA
"ITV's share of the airtime would be a concern. Advertisers might applaud ITV's decision to defend its market share through acquisition - but hope that it won't distract it from its goal, which is to deliver strong ITV1 audiences."
NO - Nick Bampton, managing director, Viacom Brand Solutions
"A significant part of the more cost-effective end of the airtime market could fall into the hands of a channel that currently leverages prices at three times the cost per impact of UKTV." As a result, the Chinese burn that advertisers are currently receiving from ITV could rapidly turn into a full Nelson."
NO - Andy Jones, joint managing director, Universal McCann
"You're never going to feel relaxed about the largest sales point potentially getting a greater share of the market. While ITV hasn't been leveraging what it has recently, it certainly did so in the past."
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