The news that Carlton and Granada, the UK’s two largest independent broadcasters, have entered advanced merger negotiations has received a mixed reception from advertisers, but concerns remain that a single ITV could prove anti-competitive.
ITV companies have been hit hard by the advertising downturn and their audience share has slipped as a result of increased competition from the BBC and BSkyB. Share prices have been in freefall for some time and the collapse of ITV Digital tarnished the reputation of both Carlton and Granada who had bankrolled the operation. The merger is seen as an attempt to consolidate revenues and improve programme quality, a move that would benefit all parties.
“The implications for advertisers are very interesting,” said one senior agency figure. “A single ITV would be a much stronger, much more competitive operation that is able to make better programmes and deliver stronger audiences.” However, there were words of warning from another insider who said that the broadcaster had “to strike a balance between investing in its core product and achieving the short term goal of generating profit.”
Although initial talks broke down in February, a Carlton-Granada tie-up has long been regarded as inevitable and speculation resurfaced when the Government reiterated its plans to relax media ownership regulations. Under current legislation, no ITV company can control 15% or more of the national audience or own both London franchises. However, even if this rule is lifted, any merger is likely to come under scrutiny from the competition authorities as a single ITV would control more than 50% of the TV revenue market.
“Whilst advertisers can see possible advantages to a consolidated ITV in terms of possible improved performance, major concerns remain over the impact that a single ITV would have on the competitiveness of the market for airtime sales,” read a statement from ISBA.
Meanwhile, the IPA said that while it understood the need to combine backroom operations, it was opposed to any deal which would result in a merger of sales activities. “From our point of view, unless we are convinced that satisfactory arrangements are in place to prevent the creation of a single sales operation – and thus to maintain competition – we would immediately refer the matter to the relevant authorities,” said Jim Marshall, the chairman of the Media Policy Group.
A direct consequence of today’s announcement could be the departure of Carlton’s chief executive, Gerry Murphy. With Granada shareholders set to receive 68% of the merged company, the deal essentially amounts to a takeover and Murphy has been linked with a senior post at the Kingfisher retail group.
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