Media Perspective: Five looks lost and lonely now Channel 4 merger plan is off

Last month, the firing of the TV negotiation season starting pistol was marked with the arrival of some ordinary-looking letters on media agency doormats.

The letters from ITV, dispatched the Ofcom-prescribed two months before the January advance-booking deadlines, contained details of the agencies' fall-back Contract Rights Renewal position ahead of the 2005 negotiations season.

Since then, media owners and media agencies have been engaged in something of a phoney war, interspersed with the usual round of agency roadshows, some with added celebrity sparkle, presentations at Berry Brothers and agreeable trips to foreign climes.

But, as Christmas approaches and with more than £3 billion of TV ad revenue on the table, as well as the potential of cash coming out of ITV, the hitherto Mexican stand-off has become something rather more serious for all concerned.

So can the timing of Channel 4's announcement that it was pulling the plug on its exploratory merger talks with five be coincidental?

The death of the deal, which looked incompatible from the start, has highlighted just how small and lonely five is looking as it approaches perhaps the most important negotiation round for years.

Poor little five, which, after several years of growth, has been left foundering without any clear strategy for how it is going to maintain its market position, let alone expand, with the continued fragmentation of television audiences. Incidentally, five's owners, United Business Media and RTL, clearly think the opposite - if the Channel 4/five merger had gone ahead, they were looking for a 40 per cent share in the merged entity as opposed to the 15 per cent that the books would suggest.

It was inevitable, then, that five would be forced to turn to another broadcaster - in this case Flextech Television, the erstwhile employer of its chief executive, Jane Lighting - in order to shore up its position.

Culturally, the two together seem a relatively good fit - both have sales departments that have had to punch above their weight, while a deal would provide each of the broadcasters with the ability to cross-promote on the different platforms and achieve some scale.

But RTL and UBM have placed such a high value on five that it seems unlikely, given Flextech's current financial position, a deal will be done in the short term.

Much more likely, then, that Flextech will choose to hold out and watch as five's audience figures slowly ebb away. And James Murdoch is waiting in the wings to get his hands on a terrestrial asset, so perhaps another phoney war, but this time for the ownership of five, has begun.