NewsLine Column: Contract Rights Renewal – So Far So Good

Earlier this month media super-regulator Ofcom published its first report on the contract rights renewal system set up to prevent the newly merged ITV from monopolising the market for airtime sales. With this is mind, Geoffrey Russell, director for media affairs at the IPA, looks at how the remedy has been working…

For anyone involved in buying television, the period from October to Christmas 2003 was an interesting one.

Having granted permission to Carlton and Granada to merge their operations, the Competition Commission had listened to the pleas of the advertising industry and laid down a “behavioural remedy” to prevent the newly-joined sales-forces from abusing their undoubted position of power in the UK airtime market.

It was called Contract Rights Renewal – or CRR for short – and it was the job of the fledgling Ofcom to work out how this brainchild of the Commission should work in practice.

Long complex meetings were held with all the interested parties at Ofcom’s shiny new offices overlooking the Thames. Heads were shaken at the scale of the task in hand and the time available to complete it. Dark forebodings were muttered as the regulator’s apparently tireless team worked impossible hours to find a solution.

And then, suddenly, it was there – snappily expressed in series of formulae that made time-buyers wish they’d paid more attention to their maths lessons at school.

There remained one other semi-impossible task – to find an individual capable of holding the respect of both the media owners and the agencies in the event of disputes on how the Remedy should be applied.

Again Ofcom burnt the midnight oil – and David Connolly emerged to take the role of the Independent Adjudicator.

Again, it was an inspired solution. Deeply knowledgeable and with a moral and upright approach to problems that would have warmed the heart of Lord Reith, he set about his task with gusto.

His first report on the success of the CRR scheme was published last week.

For the outsider, it may have been puzzling that after the protestations of the agencies, Connolly had been asked to adjudicate on only three disputes in the first quarter of 2004. However, that is to miss a series of key factors – firstly, the enormous amount of guidance which the Adjudicator had been able to give companies to help them resolve their differences within the framework of CRR and secondly, the attention paid by Carlton/Granada themselves to the detail of the Remedy.

Having got this far, the new sales operation would have been foolish indeed, to have been anything other than understanding and compliant as far as its customers were concerned.

In short, it was in everyone’s interests that the Remedy should work – and allowing for inevitable teething problems, things actually went remarkably smoothly.

So were ISBA and the IPA wrong to fight the overall Carlton/Granada merger in the way they did?

Emphatically, the answer to this has to be “no”.

Without the determined stance taken by advertisers and agencies, a combined Carlton/Granada sales force could very well have been left unconstrained to exploit its market power.

And, of course, the Connolly Report has noted that important niggles still remain with regard to some current ITV sales practices.

There are reports that the spectre of conditional selling, once agencies seek to vary contract arrangements, is still very much with us.

There has been a sense in some quarters that the new system has reinforced a rigidity of behaviour and interpretation that has made the negotiation process painful and sometimes, very mechanical.

And, finally, agencies have yet to see how Carlton/Granada might behave when the CRR’s “Ratchet Mechanism” looks like permitting a forecast reallocation of up to £100 million of ad revenues outside ITV as a result of the broadcaster’s falling audience share.

This is not to be ungracious to Carlton/Granada, which by and large has played the first quarter fairly and to the book.

However, with the City likely to be breathing down Charles Allen’s neck, I hope it would not be uncharitable to record a verdict of “so far, so good” on the CRR Remedy – and to advise the Adjudicator to keep his steely eyes well peeled over the coming months.

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