Regulator Bows to ITV Pressure, Grants Ad Rates Review

10 September 2007

LONDON: Like a stare-out between two master poker players, the persistent lobbying by ITV plc, the UK's largest commercial broadcaster, has eventually paid off.

Communications regulator Ofcom agreed Friday to a review of the long-running Contract Rights Renewal (CRR) mechanism - a set of constraints that tie the broadcaster's ad rates to its audience numbers.

Conceived by the risible Frankenstein's monster set-up by the Blair administration, the Department for Culture, Media and Sport, CRR was thrown as a sop to opponents of the January 2004 merger that created ITV plc from the union of Granada, Carlton Communications and their respective satellites.

At the time of the giant's genesis, its main channel ITV1 commanded 43% of all British commercial impacts - a dominance that alarmed advertisers, agencies and rivals alike.

Since when, however, a combination of inept programming and stiff competition from new digital channels has eroded ITV1's command of the nation's television ad market, down from 43% to 32.3% in January-June this year.

Neutering - or at least enfeebling - CRR has therefore been a top priority for ITV's Great White Hope, executive chairman Michael Grade who hit the hotseat in January of this year.

Speaking Friday to The Daily Telegraph, Grade conceded it improbable that the controversial mechanism will be abandoned entirely. "I think it's likely that the debate will revolve around how CRR could be amended or what could replace it," he said.

"I think the advertisers would expect some measure of confidence that ITV can't return to the bad old days. The fact is that there's so much competition today that it's impossible for us to be as arrogant as we used to be.

"But memories are long in this business so we may have to reach a consensus about its replacement."

Advertisers and agencies, for their part, will lobby vigorously to ensure CRR remains in situ. Says Bob Wootton of the Incorporated Society of British Advertisers: "CRR has been an effective intervention delivering significant value to television advertisers for a number of years."

"At its core, CRR links ITV's revenues to its audience share performance. As long as ITV retains its dominant market position, measures must be in place to ensure the continuation of this performance-based relationship."

But Aegis Group ceo Robert Lerwill was in surprisingly placatory mode. "I think an adaptation [of CRR] is probably needed. The structure was put in place at the time of the Carlton and Granada merger and probably didn't envisage the rate of decline there has been in terrestrial TV audiences."

As ever, the most apt summation came from Planet Money. "There's going to be a lot of horse trading. The advertisers are not going to let anything come into effect that they don't like," opined Dresdner Kleinwort analyst Omar Sheikh.

Data sourced from; additional content by WARC staff