TV Franchise Costs

TV franchise incumbents may end up pay- ing two or three times their current Exchequer Levy in order to retain their franchises, according to a report from stockbrokers Gilbert George.

Some incumbents will be forced to bid so highly to retain their franchises that after the franchise auction there will have to be a stringent round of cost cutting.

The report, Awaiting the Recovery, bases its findings on share of revenue adjusted for the loss of Channel 4 sales, network budget and costs levy, ITN, the costs of airtime sales and programming, estimated pre-bid profits and capital employment.

The study cites Thames and LWT, in particular, as likely to sustain losses, since their lucrative franchises will be fiercely contended.

The report has taken into account the cost base of the incumbents and estimated the maximum cash bid possible on a maximum commercial return of 20%.

Analyst KPMG Peat Marwick McLintock has also estimated that there will be a total of 38 C3 bidders, with four new consortia taking franchises. Gilbert Eliott: 071 628 6782