The reality of a world-class case of empty words
Andreas Whittam Smith
Andreas Whittam Smith was a financial journalist until 1985 when he led the team that founded The Independent. The paper’s first editor (1986-1994), he has subsequently been the president of the British Board of Film Classification (1998-2002) and chairman of the Financial Ombudsman Service (1998-2003). He is currently First Church Estates Commissioner responsible for £5bn of the Church's investments, and chairman of the Children's Mutual.
Monday 29 November 1999
Dazzled as we are by the glamour of the tycoons who run the two companies - Michael Green with his personal fortune of more than pounds 100m, and Clive Hollick with his title (Lord Hollick of Notting Hill) and his friendship with the Prime Minister and the Chancellor of the Exchequer - this central issue can easily be missed. In the accounts of the deal in Saturday's papers, it was left to anonymous executives of advertising agencies to make the point.
Moreover, there are barriers to market concentration which, on the face of it, should make it impossible for the two groups to combine. In 1994 the ITV companies gave an undertaking to the Office of Fair Trading that no single unit would control more than 25 per cent of the market, a line that would be far exceeded. And the Broadcasting Act imposes a limit of 15 per cent on the share of television viewers. While Green and Hollick calculate that luckily their combined group would fall short with a 14.9 per cent share, this is surely too close. If the deal went through, the combined group would be fighting to increase its proportion.
However, as Rupert Murdoch has often demonstrated, such anti-monopoly regulations are easily got round. Government ministers have already indicated that these old limits are due for fresh consideration if not revision. It is all part of being friendly to business. Now Green and Hollick are forcing the issue. The statements made with the announcement of the merger terms had this end in mind. They were aspirational rather than factual. And they were careful to include three fashionable notions - world class, digital and the Internet.
So Hollick said the two companies would be creating a "world-class" broadcasting group. What does "world class" actually mean? Sometimes it is a shorthand way of saying "among the best in the world". In this sense, Cambridge University is a "world-class" institution.
I hardly think that anything in the empires of Michael Green and Clive Hollick is world class in this sense. When we watch Carlton's output, or Central TV, which was fined a record pounds 2m by the Independent Television Commission for making a programme that involved a "wholesale breach of trust between programme makers and viewers", we don't have a sense that we are experiencing the best in the world. Nor when we read the publications put out by Hollick's Express Newspapers. Alternatively "world class" can indicate "able to compete with the best in the world".
The Rolls-Royce aero-engine business is obviously such an operation, but two domestic TV companies, even when combined into one big group? Broadcasting is not an international activity unless the output comprises a 24-hour news service. Making TV programmes which are sold all over the world would be a "world class" undertaking. But even the much bigger BBC, with all its prestige and international standing, has only limited success as an exporter or licenser of programmes abroad.
No, for Green and Hollick "world class" are empty words, a dream not a reality. This language is designed to make government ministers feel that they are doing the right thing if they ease the rules governing competition. Digital technology comes into the equation through Carlton's half share in the new digital service, On Digital. Here the argument is that the bigger group, comprising more than half the ITV network as it would do, together with the Express newspaper interests, would be able to push On Digital much harder that it can at present.
But one only has to spell this out to see that it is not particularly plausible. The promise of cross marketing success when companies come together in a merger is often hard to realise. In any case On Digital already has Granada behind it (Carlton's existing partner in the venture). The hopes expressed by Green and Hollick are worthy, the statements of intent are not obviously wrong but, finally, does it add up to anything substantial?
The trick with the third fashionable notion, the Internet, is to contrive to link it to everything else a company is doing. It is like an incantation or magic spell that is supposed to turn everything into gold. Thus Hollick said that "bringing free and pay television programme making and the Internet together in one company creates huge potential". Indeed, it could do. Both newspaper readers and television station viewers can be directed towards company web sites in numbers so large that e-commerce transactions become viable. And as publishers of news and of sports programmes, the merged group would have a substantial amount of content to place on its web sites.
So this is the equation for government ministers. On the one hand, the proposed merger would create a monopoly position in TV advertising, enabling higher prices to be charged to retailers, which in turn would be passed on to consumers. On the other hand the deal would enable two medium-sized media companies to make a better go of Internet trading than otherwise might have been the case.
That is it. And the answer is obvious. No.
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