The UK’s dominant commercial broadcasters Granada and Carlton Communications will find out later this week whether their long-held aspirations to merge have been given the green light by the government. The two companies have been discussing merging their operations since 2001 with a view to cutting expenditure levels, increasing programming budgets and providing better competition to the UK’s other broadcasting heavyweights, the BBC and satellite broadcaster BSkyB. However, those against the alliance have repeatedly pointed towards the impact it would have on the advertising market, as between them Granada and Carlton control more than 50% of the airtime on commercial television. Speculation is mounting that the UK’s competition watchdog will recommend that the two broadcasters sell off all or part of their respective advertising sales divisions before giving the deal the go-ahead. Granada and Carlton have objected vociferously to the introduction of such a condition, claiming it would seriously undermine many of the reasons for the merger. Another possible course of action being mooted includes mandating Carlton and Granada to auction off a fixed proportion of their advertising airtime each year.
With seven of the 15 ITV regional licences, including Yorkshire, LWT and Meridian, Granada is the largest commercial broadcaster in the UK. Its content division claims to produce and broadcast over 9,000 hours of original programming worldwide each year. Carlton’s franchise portfolio includes Wales and the West of England (HTV), Greater London (Carlton), the Midlands (Central) and the South West (Westcountry). It also holds stakes in news producer/broadcaster ITN, London News Network (LNN) and breakfast television station GMTV.
The two broadcasters have a long history of participation. In November 1998 they combined to launch the digital terrestrial television (DTT) platform ONdigital. It was rebranded ITV Digital in July 2001 with hopes that a GBP315 million three-year deal for exclusive rights to broadcast the UK’s Football League matches would ensure accelerated growth in customer numbers. However, in the face of stiff competition from BSkyB, subscribers figures stalled at 1.26 million and in March 2002 the company was put into administration. In April, having been unable to attract a buyer, ITVDigital was broken up and by May 2002 had stopped broadcasting its pay-TV channels; it closed altogether shortly afterwards.
Escalating costs associated with the wind-up at ITV Digital, combined with a decline in UK advertising revenues, resulted in the merger plans being shelved in mid-2002, with both companies deciding there was little opportunity to make significant savings by joining forces at such a difficult time. Then, in December 2002 it was announced that a preliminary deal had finally been struck, under which Carlton shareholders would have a 32% stake in the merged company with Granada investors holding the remainder. It has been proposed that Carlton’s Michael Green will chair the new vehicle whilst Granada’s Charles Allen will become its chief executive.
Rival UK terrestrial channels Channel 4 and Five have both campaigned strongly against the merger, claiming that the enlarged operation will control around 54% of TV advertising revenues in the UK – too great a share for fair competition. ITV’s advertising share is not what it once was, however, and its 53.6% share of NAR in 2002 had fallen significantly from the 62% it enjoyed in 1998. Much of the balance has gone to new terrestrial entrant Five, which took a 7.5% share in 2002, and BSkyB (10.2%).