Magazine article Marketing

Amanda Andrews on Media: ITV's Shock Tactics

Magazine article Marketing

Amanda Andrews on Media: ITV's Shock Tactics

Article excerpt

The idea of a merger with C4 and Five grabbed the headlines, but solid proposals are now needed.

The UK media landscape is transforming and the unthinkable is happening: national newspaper rivals are about to start sharing offices, ITV is expected to sell once treasured parts of its business and hundreds of jobs are being cut.

But is the situation dire enough to provoke the biggest shake-up in British broadcasting history?

Last week, it emerged that ITV has held discussions with the government about merging with Channel 4 and Five. The talks follow communications minister Lord Carter's Digital Britain report, in which ITV was asked to offer radical solutions to the challenges facing commercial TV by 12 March.

ITV was the first to admit this idea was a dramatic departure - referring to it as 'blue-sky thinking' and 'radical' - but said a merger was one way of combating the advertising downturn and providing sustainable, guaranteed public-service competition to the BBC.

Michael Grade, ITV's executive chairman, knows that the chances of this extreme tie-up being allowed by regulators are minimal. He also knows the advertising industry would object to the decrease in competition that would arise from such a deal. There is also a strong chance that Grade himself does not favour it.

His main motivation for putting forward such a radical proposal is, surely, a cry for help. He does not believe the government and regulators have understood the sheer scale of the crisis facing ITV and hopes that his willingness to present such a radical idea will wake them up to its situation.

Not only are advertising revenues set to tumble more than 20% in the first quarter of this year, and an estimated 15% for the full year, but Grade has been angered by a series of regulatory decisions, including the Competition Commission's blocking of Kangaroo, its proposed online TV venture with Channel 4 and the BBC.

In addition, ITV's contract rights renewal (CRR) mechanism, which regulates the sums it can charge advertisers, is being relaxed, rather than abolished as it had hoped. Some advertisers have said that CRR, introduced to protect them from ITV's market dominance after the Carlton/Granada merger, must not be axed, despite the decline in ITV's ad revenues.

A further challenge is the uncertainty over whether BSkyB will be able to hold on to its 17.9% stake in ITV. The competition authorities have recommended it reduce its stake to 7. …

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