ITV Could Receive Boost From 40% Cut In Licence Fees
ITV could receive a significant financial boost over the next few years if media regulator Ofcom goes ahead with proposals to cut the commercial broadcaster’s licence fee cut by more than 40%.
The newly merged ITV currently pays around £200 million a year to the Government in licence fees and contributes another £250 million through the public service broadcasting quotas included in the franchise terms.
As well as regional and national news programmes, ITV is required to screen a minimum number of hours of children’s, current affairs and religious programmes. It must also foster independent production companies.
According to the Sunday Times, Ofcom will set out how it intends to value ITV’s licences over the next decade. It recently altered the licensing timetable so ITV can rebind for all 16 regional franchises from 31 December.
It is understood that ITV executives are planning to take advantage of the opportunity offered by Ofcom and hope to have the full financial terms for all the franchises renegotiated by the end of June next year.
Analysts and industry executives believe the level of fees will fall sharply as a result of the negotiations. The licenses are for analogue television broadcasts and the number of analogue viewers in the UK is falling sharply as people switch to digital.
ITV currently pays a flat cash fee each year and a variable fee depending on its ‘qualifying revenue’. With ITV revenue for analogue falling as viewer numbers drop, a decrease in licence payments looks virtually inevitable.
The renegotiations could give ITV a much-needed boost to profits. Reports suggest the broadcaster could face a deficit of around £100 million in revenue as big-brand advertisers seek to negotiate more competitive deals following its recent decline in audience share (see Dip In Share Leaves ITV Facing Revenue Shortfall).
Last year the then BBC director general, Greg Dyke, said that ITV was so weak that financial help was needed to prevent it abandoning its traditional public service role. He called on Ofcom to recognise that ITV is no longer the “cash cow” that it once was and cannot afford to be paying more than £200 million a year for its analogue licence (see Dyke Calls On Government To Strengthen ITV).
ITV: 020 7843 8000 www.itv.com
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