View from City Road: Carlton starts with a good picture

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The Independent Online
Perhaps the brave new world of commercial television is not going to be as bleak as once feared. Before the new licensees started broadcasting on 1 January, there were predictions of doom for the traditional Channel 3 companies, which faced ever-increasing competition from satellite and cable.

Yet Carlton TV, the new weekday licensee for London, has covered its operating costs just eight weeks after switching on its transmitters. It expects to be covering interest costs as well in its first nine months. One source at the parent company, Carlton Communications, is already talking of meeting the target 24-25 per cent return on capital.

For any start-up to achieve a clean profit in year one is impressive, especially with the British economy so weak. Part of the achievement is Carlton's own: start-up costs were much lower than envisaged, thanks to low rents and savings on transmission costs. The advertising sales team seems to have sorted itself out after a ropey start. In March and April Carlton beat the market shares achieved 12 months earlier by its predecessor Thames TV. The programmes have not inspired much critical acclaim, but the viewers seem happy enough with hits like Head Over Heels and The Good Sex Guide.

But Carlton has also benefited from a strong pick-up in advertising nationwide in the first quarter. The car industry alone has been advertising like never before thanks to the number of new launches. That will not last. Zenith Media, the media buying arm of Saatchi & Saatchi, expects the TV advertising growth of 8 to 10 per cent so far this year to slow to around 5 per cent.

Meanwhile new technology continues to pose an even bigger threat to Channel 3 than the hated Broadcasting Act. New 'compression' technology being pioneered in Hong Kong by Star TV will soon enable a transponder to broadcast five different channels simultaneously. In one fell swoop the Astra satellite could multiply itself.

So the licence to print money has probably gone for good. That may be no bad thing for television companies lobbying for an easing of the rules on mergers. The Independent Television Commission, which already seems to be softening its attitude, would be less likely to sanction more cosy tie-ups - such as LWT's with Yorkshire Tyne-Tees announced last week - if the industry shows itself capable of churning out profits without them.