ITV Bosses Contradict Each Other Over Ad Refunds

03 September 2004

Confusion appeared to reign earlier this week as to whether ITV -- the UK's largest commercial broadcaster -- is liable to refund advertisers up to £100 million ($179.4m; €147.3m) under the Contract Rights Renewal mechanism.

The so-called CRR process was imposed by media regulator Ofcom when the ITV network's two largest players, Granada and Carlton Communications, merged on 1 January this year.

CRR was instigated after robust lobbying by advertisers and agencies, concerned that their contracted ad rates (which are based both on total committed spend and predicted viewing levels) would be weighted against them by any fall in ITV's audience share.

In such an event, the CRR allows ad buyers to switch expenditure out of ITV and into other TV channels.

Charles Allen, the broadcaster's chief executive, was questioned on the issue at the Edinburgh TV Festival last weekend. He dismissed as "nonsense" reports that ITV might have to rebate up to £100m under the CRR terms.

He declared his confidence that ITV's ongoing audience decline would be halted by its autumn schedules, at the same time admitting it had undergone a "terrible six weeks" during the July-August double whammy of Channel 4's Big Brother 'reality' blockbuster and the Olympic Games.

However, on arrival back at the ITV bunker, Allen appears to have been challenged on his interpretation of the CRR liability. The company's respected chief executive of broadcasting and enterprises Mick Desmond went public to set the record straight.

Speaking Wednesday to Marketing magazine, Desmond conceded that the CRR liability could cost ITV £50m of business in its current fiscal. However, it aims the stem this cash haemorrhage by offering selected clients deals on sponsorship and ad positions.

Industry observers doubt that Allen's already shaky standing in the eyes of ITV's major institutional investors will have been enhanced by this apparent confusion.

Data sourced from: BrandRepublic (UK); additional content by WARC staff