Crunch time nears for the television gamblers
Shares in ITV companies will either soar or crash in the next six weeks, writes Cathy Newman
Thursday 29 May 1997
Key to the multi-million- pound gamble is the imminent publication by the Independent Television Commission of the procedures and timetable for renewing broadcasters' licences. A document to be published in the next six weeks will give a clear idea of when licences can be renewed and whether a reduction in some broadcasters' payments to the Treasury is likely.
The ITC's move might seem premature: licences for the 15 Channel 3 franchises and GMTV were awarded for a 10-year period starting from 1993 and could theoretically run until the end of 2002. But if broadcasters renew at the earliest opportunity, the new terms would come into effect as soon as 1999.
Early licence renewal is a priority for many companies as present payments vary wildly for each franchise, from Scottish Television's "licence to print money" - an annual fee of pounds 2,000 or pounds 5.50 a day - to Carlton's pounds 46m yearly levy.
The wide spread of payments to the Treasury reflects the terms of the controversial ITV licence auction four years ago, which handed the right to broadcast to the highest bidder. As a result broadcasters paid as little as they felt they could get away with. Companies which guessed correctly that they would face little competition put in a token bid while those in a genuine race ended up paying through the nose.
STV and Central both paypounds 2,000 annually because they didn't have to outbid other broadcasters. By contrast, HTV's pounds 22m contribution each year reflects a tough contest against three other contenders.
High bidders such as HTV, Carlton, GMTV and Yorkshire-Tyne Tees Television will aim for an early renewal and a substantial discount, perhaps as much as 50 per cent, on theircontributions. Those happy to sit tight are STV and Central and those which are undecided, the "sensible bidders", are likely to include Anglia, Granada, and LWT.
The ITC's chief executive, Sir Peter Rogers, has indicated he will look fairly favourably on ITV companies wanting to reduce their fees. In evidence to the National Heritage select committee in February, he said: "As cable and satellite grows ... and as digital terrestrial grows and as digital satellite grows and so on, the likelihood must be that what would be paid at tender from 1 January 1999 will be lower than it was when we made that decision in 1991."
ITV companies have 101 reasons why their fees should come down. Chris Stoddart, managing director of GMTV, which paid 55.7 per cent of its net advertising revenue (NAR) to the Treasury last year according to ABN Amro Hoare Govett, said Channel 5, satellite and cable were eating away at his audience share and the value of an ITV licence should be reassessed. He said: "We're paying more than twice as much as any ITV company as a percentage of our NAR. We also have a breakfast time franchise, so we're not making drama which can be sold on to other channels."
The prospect of the phasing out of the Channel 4 funding formula, which boosts ITV coffers by more than pounds 70m annually, is also putting pressure on ITV's finances.
But many in the City are openly hostile to ITV's plight. Alastair Smellie, media analyst at ABN Amro Hoare Govett, is typical: "Why would a Labour government with fairly aggressive spending plans want to give back money to the ITV companies which are making pretty good profits? There is extraordinary inequality in the licence fees, but the bottom line is that ITV broadcasters are paying for a monopoly."
Many feel the levels of reduction expected by some companies are over- optimistic. One analyst said: "Built into YTTV's and HTV's share price is the expectation of a 50 per cent reduction. But it's just not going to happen."
Granada's statement in March that it would not bid for YTTV "unless there is a material change in Yorkshire's circumstances", reflected the feeling that YTTV's share price had been pushed up by an expectation of a substantial reduction in the licence fee, "realisation of which is far from certain".
Although YTTV's shares are well off their peak of 1,315p at yesterday's close of 1,127.5p they still trade at almost twice their value at the beginning of last year.
Even if the ITC proves as good as Sir Peter's word, the issue of how new terms should be agreed is a thorny one. Chris Rowlands, chief executive of HTV, says programming costs in his franchise are higher than in other regions as the company broadcasts separate services for Wales and the West of England. "We'd like to see a licence-by-licence renegotiation which would take into account the individual circumstances of each franchise," he said.
Other licensees would like a more uniform approach to fees. YTTV has consistently called for a level playing field, where all television companies, including satellite broadcasters such as BSkyB, should pay the same levy, set at around 14 per cent of their total revenue.
Nick Castro, financial director of YTTV, said: "We've been advocating a situation where all broadcasters contribute on a fair basis towards any Exchequer requirements." This charge, YTTV estimates, would give the Government the pounds 400m it currently gets from the Channel 3 levy.
The ITC document is unlikely to make specific mention of Sky, although the competitive situation and the proliferation of alternative digital, cable and satellite channels will almost certainly be taken into account.
- 2 Tom Cruise: Reporters banned from asking actor about Scientology
- 4 Dutch King Willem-Alexander declares the end of the welfare state
- 5 Giant Minion terrorises drivers in Ireland as 40ft inflatable blocks traffic on Dublin road
Edward Heath 'raped 12 year-old boy at Mayfair flat'
Sabrina Corgatelli: US hunting tourist posts picture of herself with dead giraffe after Cecil the lion outrage
'Gene drive': Scientists sound alarm over supercharged GM organisms which could spread in the wild and cause environmental disasters
Labour leadership race: Jeremy Corbyn could be the next Prime Minister, says Ken Clarke
Tom Cruise: Reporters banned from asking actor about Scientology
Is Britain really full up? Are migrants taking our jobs? Leading academic answers the most common anti-immigration claims
Calais Migrant Crisis: Deputy Mayor of Calais labels Cameron's use of 'swarm' as 'racist' and 'ignorant'
Chris Leslie: Jeremy Corbyn's anti-austerity agenda will harm the poor, says Labour shadow Chancellor
Landlords renting properties to illegal immigrants to face up to five years in prison
While we fixate on Calais, the Home Office is quietly deporting dozens of migrants on 'ghost flights'
Calais crisis: The seven claims made about the migrants - and the reality
iJobs Money & Business
£35 - £50k DOE: Guru Careers: A Tax Manager / Accountant (ACA / CA / CTA) is n...
£35000 - £37000 per annum + benefits: Ashdown Group: Contracts Executive - Cit...
£20000 - £25000 per annum + OTE £45K: SThree: SThree Group have been well esta...
£21000 per annum: Recruitment Genius: This is an exciting opportunity to join ...