Advertisers Give Mixed Reaction To ITV Merger
The Government’s decision to allow Carlton and Granada to merge without selling off their sales houses has received a mixed reaction from advertisers, who are concerned that a single ITV will exercise too much power in the television advertising market.
The Institute Of Practitioners in Advertising has expressed its disappointment at the Department of Trade and Industry’s decision to permit the merger subject only to behavioural restrictions on Carlton and Granada’s sales operations (see ITV Cleared To Merge With Sales Houses Intact).
The ITV partners will be required to allow advertisers to renew their share deals on the same terms as their previous contracts. They will have to agree to price promises, known as contract rights renewals, that will be overseen by an independent adjudicator (see ITC And Ofcom Joint Briefing – ITV Merger Announcement).
The IPA has been pressing for structural constraints to prevent a combined Carlton and Granada sales house from monopolising the market for television airtime sales and driving up prices for advertisers.
The industry body now plans to lobby the Department of Trade and Industry to ensure that the system of contract rights renewals is as ‘water-tight’ as possible to prevent the combined ITV sales house from abusing its dominant position.
The IPA’s director for media affairs, Geoff Russell, said: “Clearly there is an enormous amount riding both on the exact nature of the undertakings that the Office of Fair Trading will be seeking from Carlton and Granada for the merger to go ahead – and the confidence that the industry as whole will have that the proposed new independent adjudicator will really be able to oversee the fair application of the contract rights renewals mechanism.”
Jim Marshall, chairman of the media future’s group, added: “A lot will now depend on how the merged company behaves – will it operate with dignity or merely seek to exploit its gain? It would be enormously helpful, if – once the dust has settled – all parties – advertisers, agencies and the broadcaster – could sit down together and agree the way ahead.”
Meanwhile, the Incorporated Society of British Advertisers, has welcomed the news that the merger will not go through unchecked and has given its support to the idea of an independent adjudicator to maintain competition in the market for airtime sales.
ISBA’s director general, Malcolm Earnshaw, said: “We welcome the fact that the Competition Commission and Secretary of State have so clearly focused on the views of advertisers with respect to ITV’s advertising airtime sales arrangements and have incorporated wide-ranging conditions aimed at ensuring competition for advertisers in their decision.”
Advertisers are keen to see the creation of a strong ITV competing more effectively for viewers against a well-funded BBC and the increasingly powerful Sky.
David Peter’s, broadcast planning director at Carat, said: “It is a good thing that the UK has a strong advertiser funded terrestrial channel, especially in the light of the increased power of satellite TV and the BBC.”
He added: “Double-divestment of the sales houses would in effect be all change but no change, which would have been a poor outcome. It is dependent on what exactly the behavioural remedies will consist of, but many of the proposals seem workable.”
However, there is some concern over how rival commercial broadcasters will react to the news of the ITV sales house merger. In the past Channel 4, Five and Sky have all intimated that a consolidated sales operation could force them to combine their interests.
The IPA’s Geoff Russell, said: “There is still danger that unless the DTI and the OFT are able to convince the other broadcasters that they will not suffer unfairly as a result of the merger of ITV, the marketplace could be reduced to just two sales forces – with all the risk to open competition which that implies.”
However, a spokesman for Channel 4 insisted that the broadcaster’s main interest would be to preserve genuine competition in television advertising sales. He said: “We are confident that a smaller, independent player like Channel 4 can continue to prosper because our financial success in the last decade has been built on delivering an upmarket and younger alternative to the mainstream audiences for ITV.”
The Trade and Industry Secretary has asked the Office Of Trading to work with the Independent Television Commission and Ofcom to obtain by 7 November undertakings from Carlton and Granada to implement a package of behavioural remedies recommended by the Competition Commission.
IPA: 020 7235 7020 www.ipa.co.uk ISBA: 020 7499 7502 www.isba.org.uk
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