ITV Ad Rates Cap: 'Significant Relaxation' Recommended

16 January 2009

LONDON: The controversial Contract Rights Renewal mechanism – the restrictive structure imposed by the government on ITV's ad rates following its consolidation as a single national entity in January 2004 - could be scrapped.

CRR, intended at the time to prevent the merged giant from abusing its dominant position in the TV airtime market, effectively capped CPM ad rates for its flagship channel ITV1 at their (then) extant level.

In effect, this meant that net rates would rise or fall in line with viewing figures. Since when, ITV1's audience has followed an inexorable southbound curve.

Smitten by declining audiences and revenues (reflected in its plummeting share price), ITV appears to be on a dangerous downward spiral. But help, in the shape of the Office of Fair Trading, is at hand.

In a pre-market statement Wednesday, the OFT acknowledged that ITV's dominant position had changed since CRR was introduced, and dangled a carrot of hope before the famished broadcaster that CRR might be reduced – even scrapped.

Such a move, say analysts, could increase ITV's earnings by £30m-£80m, depending on the degree of relaxation.

And although the OFT's document – now out for consultation – does not spell this out, it is significant that  it left open the possibility that it will recommend abolition of CRR to the Competition Commission.

The latter will make the final decision, probably in April or May

Data sourced from Financial Times; additional content by WARC staff