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Granada & Carlton merger

By The Drum | Administrator

August 28, 2003 | 6 min read

Geoff France of Channel 5, Euan Jarvie of Mediacom, Andy Jones of Barkers Scotland and Phil Jones of Spirit Media Scotland.

In around two weeks time culture, media and sports minister Patricia Hewitt will decide the fate of UK terrestrial commercial television. Talk about difficult decisions. Dave Hunter asks some leading media commentators to predict her decision and the possible consequences.

When the Government announced plans for the publishing of a new White Paper on media ownership, everybody knew what would follow.

One of the most obvious alliances in British media history was at the forefront of everybody’s minds and, sure enough, the rumours were quick to surface. These were followed last year by an official announcement by Carlton and Granada that they were indeed in “advanced merger talks”, confirming what every man and his dog in the country already knew.

Now, almost a year later, the ups and downs of the proposed merger have been keeping everyone in the media and marketing industries on the edge of their seats. But now, finally, the waiting is about to be over. The Competition Commission, which has mulled over the deal for a number of months, last week handed its recommendation to the Department of Trade and Industry. The country now eagerly awaits an announcement from Industry Secretary Patricia Hewitt, which is expected within the next fortnight.

“I think it’s inevitable, to be quite honest,” says Andy Jones, a director at Barkers Scotland and former director of Feather Brooksbank. “The way the media marketplace is fragmenting it makes perfect economic sense to allow it to go ahead.”

“Well, personally, I think they will merge,” Geoff France, regional sales director for Five, agrees. “I’m just back from the television conference in Edinburgh and Tessa Jowell was speaking. Her topic was ‘Life after the Communications Bill’ and the vibes coming out of that speech were that they were going to be allowed to merge.”

One of the key reasons these discussions have gone on so long is that, in merging both companies together, a combined ITV would then command more than 50 per cent of the UK television advertising market. In terms of competition in the marketplace, this causes a serious problem. How do the companies merge without creating a monopoly situation?

Phil Jones, a director of Spirit Media, says. “I think there will be an agreement that the merger has to go ahead, but there will be stringent rules attached to it. I think in this current marketplace they will have to accept it makes sense. I don’t think they will centralise the sales operation, though. I definitely think from a buyer’s point of view there should be a maintenance of choice.”

Both Carlton and Granada are pushing the merger on the grounds that it is the only way to save ITV. Both companies have been taking losses in recent years, with an increasing debt not helped any by the disastrous collapse of ITV Digital. A combined company would, in theory, be able to consolidate its resources, focusing on improved programming and, ultimately, audience share.

But while a merger could save ITV, is it in the best interests of UK advertisers?

Concern has been raised by those working in the media sector that, when it comes to media and, in particular, airtime, the Government doesn’t know what it’s doing.

Euan Jarvie, managing director of Mediacom Scotland, comments: “Banking on what the Government’s going to do with this type of thing is very difficult because they don’t fully understand how airtime is traded. I don’t think the industry in Scotland really understands the intricacies of the average station price either. I think if you asked any number of Scottish agency MDs how to price television airtime they couldn’t tell you, so how can they formulate an opinion as to whether this is good or bad for Scotland’s advertisers? My view is that it is bad.”

Jones, at Spirit Media, agrees that certain advertisers may find it difficult if the companies, and particularly the sales operations, merge. He says: “I think there’ll be a honeymoon period when there will be little or no effect and then things will start to change. From a client’s point of view, they’ll end up with strong alliances between the big advertisers. They won’t suffer because they’ll be the bread and butter. But I think the smaller companies will suffer because they will find it very hard to get on to ITV.”

However, Barkers’ Jones believes that, even as a merged entity, ITV will not be able to bully advertisers. “The argument that ITV will have a stranglehold on advertisers is no longer correct,” he argues. “What’s been happening is that the other media, be it other television broadcasters, radio or even newspapers, have been becoming much more competitive and establishing themselves as a strong alternative to advertising on ITV.

“I think it’ll be a good thing for ITV as a whole. ITV’s in a position where it’s been in a decline for some time now. As far as the advertisers go, there will be some disquiet in the short term but if ITV starts to monopolise it will end up losing revenues. There are plenty other channels and media to advertise in as an alternative to ITV.”

As well as the merger between Carlton and Granada, the Government’s new White Paper opens the door to media companies from outside the UK, however. France predicts that this also could become an issue sooner rather than later. He says: “What has also been coming through was that ITV could be in a position to be bought by a foreign predator by the end of the year. One of the main lines of questioning in Edinburgh was how Jowell felt about a foreign suitor owning ITV and she never made reference to the fact it wouldn’t, or couldn’t, happen. December was given as a date when a foreign company could make an offer.”

At the time of going to press, it is still anybody’s guess what will happen with ITV. The UK’s media can only hope that, whatever the decisions, they will be in the interests of the entire industry, and not just the interests of the two ITV giants.

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