ITV Duo Propose Viewing-Related Ad Rates

06 June 2003

Who said innovation and creativity were things of the past in the UK TV industry?

In an effort to mollify advertisers and agencies – and convince the Competition Commission that the planned merger between ITV’s two controlling shareholders Carlton Communications and Granada Media would not constitute a terrestrial TV ad monopoly – the duo on Thursday proposed a revolutionary new concept.

A merged ITV would gear its advertising rates to actual viewing figures.

As one cynical observer remarked: “If this concept ever spreads to newspapers, magazines, B2B media, radio and outdoor, it could spell the end of advertising as we know it!”

Since its inception fifty years ago (when it comprised fifteen independent regional franchises), ITV has operated an advertising mechanism known as the ‘station average price’. This labyrinthine system calculates the average price for an ITV region by dividing total advertising revenue by the number of people viewing advertisements.

In the early days of ITV the mechanism worked, not least because of genuine competition between the fifteen different franchisees for their share of the advertising pound. Now there are effectively just two players, Carlton and Granada plus three small fry: SMG (in which Granada has a significant stake), Ulster and Channel.

Carlton owns four ITV licences, an airtime sales house (representing its four licences and the two SMG licences), a number of content production companies, books and video/DVD production. It also has shareholdings in GMTV, ITV2, ITN, ITV News and London News Network.

Granada operates seven regional ITV licences, an airtime sales house for nine ITV licences (its own seven plus Ulster and Channel) and several programme production companies. It also has stakes in SMG (two Scottish ITV licences), GMTV, ITV2, ITN, ITV News, London News Network, Granada Sky Broadcasting and Manchester United TV.

In this transformed regime, advertisers fear the melding of Granada and Carlton – and their respective sales organizations – could lead to abuse of the merged entity’s control of over fifty per cent of all British TV advertising.

The latest move by the ITV duo brings to four the number of options currently being mulled by the Competition Commission. The initial three proposals aired by the regulator are decidedly unpopular with the betrothed couple.

They are: (1) Divestment of at least one of their respective sales houses; (2) The creation of an ITV sales unit independent of both broadcasters; and (3) The cessation of override discounts to advertisers and agencies in return for committing a predetermined percentage of their annual ad budget to ITV.

The commission will rule on the matter by June 25 and send its recommendations to Patricia Hewitt, the Trade and Industry Secretary. Meantime, neither Carlton or Granada would comment on their latest offering.

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