NewsLine Column: The ITV Merger Drama
As the deadline for a decision over the proposed Carlton/Granada merger draws closer, James Papworth, ad marketing manager at IPC Prospector, puts the deal under the microscope and considers the pros and cons for advertisers.
Like many other impartial observers in the media industry, I’ve watched the machinations of the Granada/Carlton merger with the same interest that I might watch Big Brother, or Eastenders: occasionally dropping in to catch-up, realising not much has changed, then changing the channel.
The problem with protracted negotiations, carried out in public, is that like Big Brother, unless you get heavily into them, they become tiresome – especially if you know the outcome early on.
After just a few weeks we all figured out that Kate and before her Brian, would win Big Brother. One is young, blonde, pretty and feisty – the other, camp, entertaining, funny and feisty. Characteristics ideal for that big move into minor TV presenting.
The ITV merger drama, as good as any actual drama on ITV these days, is much the same. ITV would not be able to sell 52% of a market worth £3.4bn, we all said. So we knew the outcome pretty much from the beginning. To be fair, no one yet knows the details of how this deal will finally be settled. But then we weren’t sure if Jade would be out before Spencer.
And like Big Brother, the ITV drama is carried out in the full glare of the media spotlight. In the consumer magazine industry we merge, launch and re-launch until our hearts are content and no one seems to mind. And this is in a business with 60% more customers than BSkyB, which is worth three times more than Channel 4 and 30% more that Carlton and Granada put together. Never mind. We carry on enjoying steady annual growth, merging/de-merging as necessary. Everyone’s a winner.
You wonder who the winner will be in the ITV story. Advertisers want a competitive ITV, sufficiently funded to stand up to the ratings-hungry BBC and the globally domineering Sky. That must mean a merger then? Advertisers don’t want to feel cornered into having limited channel options with one dominating terrestrial channel charging (perhaps) higher prices. That must mean no merger then?
But remember the 1980’s? Advertising was at its zenith, pony-tails and Porsches everywhere, but not much on TV. Saturday afternoons were the worst. Horseracing on BBC1, Open University on BBC2 and wrestling on ITV. What was on the other side? Nothing – there was no other side!
Advertisers are concerned that the merger will mean higher prices, maybe even encouraging other stations to merge, further restricting their channel options.
From a publisher’s point of view, we’d welcome disenfranchised TV advertisers. From a holistic point of view the reality is that ITV is struggling in a competitive market. Ratings are down, revenue is down and programme quality is being affected – there’s even talk of Emmerdale going to six days a week!
That said, for the six months to March 2003 Granada profits rose by 35% to £65 million, supported by quotes like “the ITV fight back is well underway” and “performance is benefiting from a clear strategy, better scheduling, more focussed marketing and a bigger programme budget”. There’s also the £1(ish) a time they get every time we vote Anthony ‘Wozza’ Thompson out of the jungle. Granada is keen on these banker shows and is vowing to make more.
If the ITV Digital debacle hadn’t happened maybe they wouldn’t be talking about a merger at all. But it did, and they are. The $64,000 question is what are the options?
A full merger? That brings advertisers and fellow broadcasters out in a rash?
Replacing the 30-year-old share dealing system with some sort of volume deal? Maybe, but this is considered unworkable by many broadcast directors. To be fair, marketing budgets are moveable feasts. Getting commitment to television at all, in advance, is hard enough, let alone agreeing how much will be spent.
But some sort of shake-up is on the way. After all, multi-channel TV is approaching 50% household penetration – homes where ITV has only a 20% share of viewing. Why should they still be allowed to set the pricing pace? Advertisers targeting young men habitually buy around ITV. Should what happens at ITV have any effect on what they pay? Probably not.
Perhaps one, or both sales operations could be sold off and operate separately from the merged programming divisions? Not really conducive to innovative sales packages or even traditional programme sponsorship and, more pointedly, not popular with either Granada or Carlton. Cost savings being so small as to negate the whole point of the merger.
Another option, not widely voiced, is that we leave well alone, letting nature take its course. ITV eventually becomes just another channel, about the same size as Five or Sky One. It would mean the likes of Daniel Deronda and Dr Zhivago being replaced by I’m A Reality TV Show Presenter – Get Me Out Of Here, Celebrity Watching Paint Dry, Pop Celebrity Driving School and Fat Club Idol. But we’ll always have the BBC for that weird ‘quality’ stuff that doesn’t have a phone-in number and has not need for the ‘red’ button.
So what then? Well the Competition Commission reports back to Trade and Industry Secretary on 25 June. Then, rather like Davina McCall’s interminable pre-eviction pauses, we wait (20 working days) to hear Patricia Hewitt’s result.
Big Brother started again earlier this month. About the same time as we know for sure if its Nush, Jon or Steph, Ms Hewitt will know if its a full merger, no merger or somewhere in between. Whatever the outcome, we’ll say we figured it out weeks before.
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