Contract Rights Renewal Working Well Says Adjudicator
ITV’s Contract Rights Renewal system is continuing to work well, with the broadcaster giving full co-operation to advertisers and bringing improved relations and a smooth working relationship, according to a report from the system’s independent adjudicator.
The adjudicator reported that no disputes were submitted in the period since the last report, and while this is not surprising as historically the summer is usually a quiet period in terms of the number of contracts that are being re-negotiated with ITV, the adjudicator did identify a number of potential areas where disputes could have arisen.
Some advertisers and media agencies did contact the adjudicator to express concerns that, should ITV1 lose a significant share of commercial impacts in 2004, then the forthcoming negotiation season will “provide a true test of ITV plc’s intention to fully comply with its CRR obligations” (see Dip In Share Leaves ITV Facing Revenue Shortfall). In particular, a number of agencies were concerned that ITV might discriminate or threaten to discriminate between agencies that are considered to be ‘supporters’ or ‘preferred partners’ and those that are not.
However, the adjudicator was quick to stress that it has not received any evidence of discriminatory behaviour by ITV, and stated that the broadcaster’s senior management had assured that staff are fully aware of their obligations and of the repercussions of such discrimination.
In addition, the adjudicator invited comments from the IPA and ISBA on the workings of Contract Rights Renewal so far. Responses from both industry bodies were positive, with the IPA reporting that the Office of the Adjudicator’s direction had enabled them to reach a fair and reasonable settlement with ITV and thus avoid the need to invoke any formal dispute procedure.
In addition, most parties thought that the CRR system has continued to run fairly smoothly and that ITV has generally complied with its undertakings and behaved in a fair and reasonable fashion. Some IPA members reported that ITV had improved its performance since the creation of CRR, notably behaving in a more co-operative and positive fashion than it did at the beginning of the CRR process.
The IPA also noted that some areas that had been highlighted as problems in the past were being gradually resolved as all parties became more aware of their rights under CRR.
However, there were also areas of concern about ITV’s behaviour that were consistently raised. The most prominent of these related to: The method used by ITV plc in calculating the Audience Ratchet Mechanism (ARM) figures, the length of time taken to agree CRR figures, ITV’s leverage of ITV2 as the ‘deal breaker’ when a media agency or advertiser seeks a contract variation or a new contract on ITV1 and the continuing rigid and mechanical approach to negotiations adopted by ITV.
In its submission, ISBA commented that it was aware that simplified versions of the ARM calculation were being agreed by media agencies and ITV plc, and expressed its concern that media agencies should not look to use simplified versions of this calculation if it does not deliver the most positive impact for advertisers.
CRR came into effect earlier this year with the completion of ITV’s merger of Carlton and Granada. Designed to dictate what ITV can charge advertisers, the system is intended to combat increasing prices from an increasingly powerful ITV (see ITV Enters New Phase With Merger Completion).
The system has so far proved successful in preventing ITV from dictating prices to advertisers, and has even been suggested as a possible answer to concerns surrounding increased consolidation in the radio sector (see Advertisers Express Concern At Radio Merger Plans).
Ofcom: 020 7981 3040 www.ofcom.org.uk
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