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Agony of ITV's own goal on Contract Rights Renewal lingers on

Will a new, Tory Culture, Media and Sport minister bring the regulatory overhaul ITV craves
Steve Hewlett
19 May 2010

The Competition Commission last week published its final decision on CRR – the Contracts Rights Renewal mechanism that ITV blames for undermining it commercially, and which it has been campaigning so hard to get rid of. As far as the commission is concerned, it's not going anywhere: "ITV's unrivalled ability to deliver large audiences on ITV1 mean CRR undertakings are still needed to prevent the channel from exploiting its position … " In other words, ITV still has a monopoly position and needs to be restrained from abusing it. ITV reacted to the decision with barely disguised hostility, accusing the commission of being "out of touch and damaging for the interests of creative Britain". For its part, the commission told ITV to stop exaggerating. But look a little closer and the report does not make good reading for ITV.

CRR has been damaging for ITV ever since it was introduced to protect advertisers from its new monopoly power after the Carlton/Granada merger in 2003. As the ITV companies themselves initially suggested it, it probably ranks as one of the most spectacular corporate own goals ever scored. In a nutshell, CRR allows advertisers to pay less for the same share of ITV's airtime if the network's overall share of commercial TV viewing goes down. All very well until you consider the inevitable (and entirely predictable) reduction in ITV's share of viewing that goes with the spread of digital multichannel viewing to more and more homes. In other words, Carlton and Granada offered up a way to smooth the path of their cherished merger that was more or less guaranteed to cost ITV a fortune. Which it did.

This explains why, ever since, ITV has been campaigning for CRR's removal or reform. The trouble is that when subjected to scrutiny very few of ITV's arguments are found to hold any water. The commission's findings confirm this – in spades! ITV claimed that its capacity to invest in programming was materially reduced by CRR's negative effect on "programme investment efficiency". But, as the commission pointed out, ITV's own consultants conceded that this was in part due to "poor programming decisions" by ITV itself. Arguments on so-called "deal debt", which arises when you've sold more commercial impacts (ratings) than you actually deliver, were just as firmly rejected.

And to cap it all, ITV's case that it no longer wields monopoly power – and that advertisers can easily replicate the effect of advertising on it by using a combination of other channels – is looked at in detail and dismissed. Worse, the commission found it was contradicted by the things ITV was telling its own investors. The story there is that ITV channels' share of all TV advertising is rising (it now stands close to 47%), with the broadcaster itself claiming that because of its mass audiences it is the only network able to offer such scale and impact. In other words, what it offers cannot easily be replicated – precisely the opposite of what the company had said when campaigning to get CRR lifted. The fact is that, recession notwithstanding, ITV's position in the TV marketplace has been improving in spite of CRR.

ITV will be hoping that, with a new, Conservative-dominated government and the impeccable political connections of its chairman, Archie Norman, CRR abolition could get swept up in what the new culture secretary, Jeremy Hunt, once described as his planned "Big Bang" media deregulation. But a closer reading of the report should give ministers pause for thought. What is needed is a full-scale review of the workings of the UK's TV advertising market, not a quick fix of disproportionate value to ITV – no matter how politically attractive that may appear.

This article first appeared in The Guardian on 17 May. It is reproduced here with the author's permission.

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