CRR is a mechanism by which the charges paid by advertisers to ITV are adjusted down as audience share in the core ITV1 franchise shrinks. As it happens, it was ITV's present chief executive, Charles Allen, who came up with the idea. It seemed a good one at a time when the priority was to convince competition regulators they should allow the creation of a company with more than half the total commercial TV advertising market.
But with ITV1's audience share shrunk to 22 per cent and falling, it seems a very poor idea indeed. Mr Allen believes his market share is now at such a level that he should be allowed to charge what he likes. The numbers are far from trivial. City estimates put the likely benefit of being released from the CRR obligation at £120m a year, which would drop straight through to the bottom line. Advertisers have two main objections.
The first is that though ITV1's market share has indeed fallen precipitously, it is still by far the largest of the commercial channels and the only one capable of delivering mass audiences. ITV may have just 22 per cent audience share, but it still commands well over 40 per cent of commercial TV advertising spend, because there are no similar mass-market alternatives.
The second is that though ITV says it needs the higher charges to maintain and build on this market position by offering top-drawer programming schedules, there is no guarantee the extra monies would be spent in this way. To the contrary, everything Mr Allen achieves by way of regulatory concession seems to go back to shareholders, not into ITV1 programming. The present outlook is for further cuts in the ITV1 programming budget.
There is a growing cacophony of anger about this phenomenon within the advertising industry, where digital fragmentation is seen as only part of the cause of ITV1's decline. More important, many advertisers believe, is poor levels of spending, creativity and motivation. Indeed one of the industry's most powerful figures recently told me the failure of ITV1 was one of the major causes of the present malaise in the British advertising market. As Channel 4 has demonstrated, it is possible to maintain and even increase market share in an age of growing multi-channel TV.
If advertisers refuse to give way on CRR it further squeezes Mr Allen's difficult position between a rock and a hard place. If he cannot improve his top line through regulatory concession, his only way of satisfying City calls for ever more demanding rates of return is to eat further into costs, which further undermines the long-term viability of ITV1 as a mass-market channel.
Mr Allen's hope is that his new digital channels and interactive sources of revenue can be made to grow faster that ITV1 can fall, but this doesn't satisfy the advertisers, many of whom believe that Greg Dyke's failed bid for ITV offered the last hope of rescuing ITV1 from oblivion.
Never mind that to satisfy his bankers, Mr Dyke envisaged even deeper cuts in the programming budget than Mr Allen. Whatever. Contract rights renewal stays, OK. Mr Allen has already persuaded Ofcom both to cut his licence fees to virtually nothing and ease his public service broadcasting obligations. But now he's on his own. He cannot rely on any further regulatory concessions to support the bottom line.
There's a surprise; rates left on hold
Hold the front page. No change in interest rates. Few would have noticed, but the Bank of England's Monetary Policy Committee decided to leave rates unchanged after its monthly meeting yesterday. Nobody expected anything else, so most would reasonably think this a decision that hardly merits comment. I beg to differ. The significance of the announcement is in the extraordinary degree of stability that monetary policy has established over the past two years, one which is beginning to look as if it may last until at least the end of the year and possibly longer. Over the past 23 months, we have had only one, quarter point, change in interest rates, which according to one anorak-wearing observer makes this the longest period of steady state interest rates since the 1950s.
Mervyn King, governor of the Bank of England, has bemoaned the demise of what he calls the "nice decade" - non-inflationary, continuous expansion - and pointed to bumps in the road ahead. Yet from where most of us sit, the picture is of the same old road running on and on into the indefinite future.
Of course, the stability of British short term interest rates has not been matched by longer dated rates, which have been all over the place over the last two years. Nor is it mirrored overseas. US rates have been rising for almost as long as our own have remained the same. European and Japanese rates too are on the up.
For how much longer might our own rates remain the same? The last Inflation Report pointed to the need for a rise possibly quite soon, with inflation overshooting target in two years if nothing is done to halt it. Since then, the data has if anything supported the hawks' case, with revisions to GDP showing that the economy has in fact been stronger than we thought. Meanwhile, the stock market, having corrected in anticipation of a slowdown to come, has now largely uncorrected again. Even manufacturing is beginning to perk up.
Yet after a cracking start to the year, the housing market seems to be cooling again, with the latest Halifax survey showing a 1.2 per cent month on month fall for June. It all points to the same steady state economy we've had for absolutely ages now. For the time being, rates seem to be priced to perfection, neither too high nor too low but just right. Certainly it is hard to point to any compelling reason for changing them either one way or the other. So is Mr King wrong about the end of the nice decade?
Regrettably not, though the bumps he foresees come not from our own economy, but from outside and particularly from an unwinding of the trade and capital imbalances we see around the world. Even so, there's no immediate cause for pessimism. Inflationary pressures are picking up, but they are not yet out of control, and there's probably at least another couple of years of decent growth left in the world economy before it all comes tumbling down. No change in rates? Long may the headlines continue.
Tennant threatened by extradition treaty
One former industrialist who will be watching developments over the extradition of the NatWest Three with more than a little trepidation is Sir Anthony Tennant, once one of the most admired business leaders in the country.
Now 76, Sir Anthony's career ended in ignominy after it emerged that as chairman of the international auctioneer Christie's he had been involved in a price-fixing agreement with his opposite number at Sotheby's.
Both companies eventually paid massive fines in settlement of various civil and criminal actions in the US, while Sir Anthony's alleged partner in crime, Alfred Taubman, was sent to jail. And so too, in all probability, would Sir Anthony had he not stoically refused to go to the US to face charges. Anti-trust offences were not covered by extradition treaty as it then stood, but according to legal opinion, they almost certainly are under the new arrangements, which can be retrospectively applied, the ones that caught the NatWest Three. Would US prosecutors be so vindictive as to pursue a 76-year-old man so long after the event? You bet they would.Reuse content