Advertising giants hit out at Allen in battle over ITV pricing

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The Independent Online

ITV is at war with its advertisers over the broadcaster's campaign to have regulations removed that limit how much it can charge for ad slots.

The advertisers' trade association, ISBA, yesterday warned that the regulations must be maintained to stop ITV abusing its dominant market position. In an announcement, ISBA also raised questions about ITV's contention that it would use any extra revenues it would gain from easing regulations to spend on programming.

Bob Wootton, director of media and advertising at ISBA, said: "ITV's recent announcement of a significant further return [of cash] to shareholders and a reduction in programme investment has strengthened many advertisers' suspicions that any increases [in revenues] would more likely be diverted from attracting viewers."

ISBA's position will come as a major blow to Charles Allen, ITV's chief executive, who started a public campaign a year ago to try to convince the industry and regulators it was time to remove a mechanism that constrains how much the company can charge, the Contract Rights Renewal (CRR). The company has said that, without a change in regulations, its future as a mass-market broadcaster is in jeopardy.

Analysts estimate that CRR will cost ITV, which continues to suffer plummeting audiences, about £120m this year.

Mr Wootton said: "The only benefit we can see, in the short term, would be to ITV. They would be able to charge higher prices for falling audiences. That is, they'd be taking more for less."

Until yesterday, the advertisers themselves had not been vocal on the issue and ITV had even suggested some were sympathetic to the case for scrapping CRR. It was put in place by regulators in 2003, as a condition of allowing ITV's then separate franchise companies to merge to form a single ITV business. ITV's advertising revenues are in decline, but it still takes well over 40 per cent of the television advertising spend.

Ian Armstrong, manager of customer communications at Honda, said: "As an advertiser, I object to being charged more for a smaller audience. If CRR was not in place, ITV would have been able to push up their rates irrespective of audiences."

Under the CRR device, any loss in audience at the main ITV1 channel is punished by a proportional reduction in the amount paid for advertising on the station. ISBA said it could see no justification for removing CRR in the "foreseeable future".

David Walker, marketing operations controller at Kellogg's, said: "We want the ability to put the money where we want to put the money. With 40 per cent market share, ITV has considerable power."

ITV has admitted it is "in dialogue" with regulators about CRR though it would not say if it has formally applied to have the mechanism overturned.

Bernard Balderstone, associate director of UK media at Procter & Gamble, the biggest television advertiser, pointed out that, even after ITV1's market share drops well below 40 per cent, the company still had other channels that had a further chunk of the ad market. He said: "ITV's ability to leverage its position in the market place is much greater than just looking at ITV1. Yes, ITV1 has got weaker but ITV has strengthened its position in the digital market place."

ITV has launched a succession of digital channels, including ITV2, ITV3 and ITV4, which could well command some 7 per cent of the ad market within the next couple of years, according to analysts.

Ian McCulloch, the commercial director of ITV, said he was "encouraged" that ISBA had not ruled out removing CRR for ever. "If you want a strong ITV1, it has to be properly funded. If advertisers want us to spend £1bn a year on it, the money has to come from them," he added.

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