Subsidy dispute splits ITV regions

A ROW is brewing between the ITV companies over the level of subsidy paid to the network's smaller regions. The argument pits Lord Hollick's United News & Media, which wants to reduce the subsidy, against the three remaining independent ITV companies: Border, Channel and Ulster Television.

The subsidy formula, which was set in 1993, allows for ITV's six smaller franchises to shoulder a lower proportion of the costs of running the ITV network.

Normally, central network costs are divided between the ITV regions by their share of advertising revenues. But because the smaller regions' own costs as a proportion of revenues are higher, they are subsidised by the larger regions.

Apart from the three independent companies three other regions: Yorkshire Tyne-Tees, Westcountry and Grampian - owned by Granada, Carlton and Scottish Media Group, respectively - also benefit from the subsidy.

As a result, three of the four large ITV groups are indifferent about the subsidy because they bear the costs and reap the benefits. Only United News, which does not control a smaller region, loses out. The issue is particularly pressing because a number of ITV companies are planning to renew their licenses, which were awarded in 1993, this year. The applications must be submitted to the Independent Television Commission by the end of May.

If the level of subsidy is reduced, that will have to be reflected in smaller companies' license applications.

Executives agree that a new agreement must be submitted for approval by the Independent Television Commission before the end of the month. However, no formal meetings have been scheduled before the middle of April.

The argument is caught up in the wider issue of the network's central budget. The four larger operators are currently pondering a major increase in programming costs as Richard Eyre, the network's new chief executive, attempts to reverse its sliding ratings.

United News argues that reducing the subsidy would make more cash available for programming. It also points out that smaller companies may not necessarily lose out, as they could use the lower level of subsidy to argue for a reduction in their franchise payments."

However, the smaller companies are adamant that the subsidy be maintained: "There is no doubt the principle will continue," says Des Smyth, chief executive of Ulster Television. "The small licensees can't pay the full costs."