Sales House Divestment Will Not Halt ITV Merger
The merger of Carlton and Granada into one ITV company will go ahead even if the Government forces them to sell off the two airtime sales houses, according to senior executives at this year’s Guardian Edinburgh Television Festival (GEITF).
The merger, which is currently being scrutinised by the Secretary of State for Trade and Industry, would lead to the creation of a single ITV with more than 50% control of the market for airtime sales.
Advertisers are opposed to this aspect of the deal and are calling for the companies to be forced to divest both their sales houses. Alps said: “If we allow Carlton and Granada to merge and have a single sales house, we would create a King Kong and lots of monkeys.”
She added: “The money that would be squeezed out of the television advertising market would come directly from Channel 4, Channel Five and multichannel operations, which would damage them, possibly irreparably, and would certainly stop them competing with ITV.”
However, former head of Five, David Elstein, insisted that the benefits of the merger do not depend on the savings generated by combining Carlton and Granada’s sales houses.
Elstein claims: “The bogeyman of double divestment [of the sales houses] has been greatly exaggerated. All the benefits of the merger, which are very, very substantial in operational terms, do not depend upon the £20 million worth of savings that might be achieved by merging the two sales houses and eliminating a certain amount of duplication.”
Elstein said that both sales houses are ‘hugely’ over-staffed, with high wage bills and argued that £20 million a year could be saved in operational costs, regardless of whether they are divested. He said: “There are 450 people doing what takes 84 to do at Channel Five.”
Carlton and Granada estimate that the merger would save them between £35 and £55 million a year in costs. However, Elstein claims that up to £100 million can be extracted from a single ITV, aside from what happens to the airtime sales houses.
He argued that substantial savings would come from combining transmission, programme making and news operations, as well as head office and other regional departments. He said: “If you look at these businesses, they’ve got operating costs of somewhere around £2.2 billion a year and they’re saying if we merge these two companies we can save 1.5% of our cost base. I think that’s very unambitious. I’ve suggested that maybe 4% might be achievable.”
“My view is that you could probably shift around £100 million a year out of in-house spend to the independent sector and deliver to the network centre greater flexibility, greater strategic impact and greater value,” he added.
Elstein also quashed rumours that he is looking to move into the chief executive role at ITV, should the proposed merger of Carlton and Granada proceed (see Elstein Rules Out ITV Bid, But Proposes New Management).