British TV firms Granada and Carlton Communications may merge without disposing of their ad sales houses, the government has confirmed.
As expected [WAMN: 06-Oct-03], trade and industry secretary Patricia Hewitt announced Tuesday morning that the two firms – dominant shareholders in terrestrial television network ITV – can complete their £4 billion ($6.7bn; €5.7bn) deal once they have agreed certain safeguards for advertisers.
The ad industry lobbied hard against the merger, arguing that the combined sales houses would wield too much power, controlling over 50% of the TV airtime market.
Hewitt agreed that certain "adverse effects" would result from the merger, but decided these could be dealt with using restrictions on the trading of airtime rather than the forced divestment of sales houses.
The minister has given the two firms until November to agree a Contract Rights Renewal strategy with the Office of Fair Trading, the Independent Television Commission and forthcoming communications super-regulator Ofcom. This CRR will impose three main conditions:
• First, advertisers and media buyers must be able to renew their current contracts with no increase in the share of spend they apportion to Carlton/Granada and no decrease in the discounts they receive.
• Second, Carlton/Granada must agree to an automatic 'ratchet', allowing advertisers to reduce their spend if ITV's audience shrinks.
• Third, the ITC and Ofcom will appoint an adjudicator to resolve disputes between advertisers and Carlton/Granada.
In addition, the two firms must stick to a series of guidelines protecting the remaining companies in the ITV fold: SMG (owner of the Grampian and Scottish licences), Ulster TV and Channel TV. These broadcasters currently sell advertising through either Carlton or Granada.
Once all parties have agreed these conditions, the two firms can merge. The resulting entity (68%-owned by Granada and 32% by Carlton) will be called ITV plc. The government hopes this will be able to compete more effectively with the publicly funded BBC and Murdoch-owned satellite giant BSkyB.
Continued Hewitt: "A stronger ITV will be better able to invest in, and provide, programming of high quality, including regional programmes. Broadcasting as a whole will benefit."
Data sourced from: MediaGuardian.co.uk; additional content by WARC staff