Wheeler-dealer frenzy is all set to continue

1997: A preview of the year ahead; Media

Media in Britain had a mega-1996, and all the signs point to another year of wheeler-dealer frenzy. Moreover, at least three events in 1997 - the launch of Channel 5, the birth of digital television and further consolidation in the ITV sector - could transform the media landscape out of all recognition.

But before looking at the big-league changes, it might be worth considering a few of the murkier prospects for the sector which, while less dramatic, could have profound implications for many companies.

There will be, for instance, moves toward a wholesale reform of advertising sales at ITV, as the big companies which control the commercial market for Channel 3 seek an end to the controversial "average station price" currently used to sell advertising time. The preferred option is something like "spot" pricing, where an advertiser pays a premium to get its message into a specific time slot. The change might be worth as much as pounds 100m more a year for ITV, a prospect that most investors have not yet factored in.

But there are also going to be negative changes for ITV, if not in 1997 then in 1998, when the Government will begin to phase out the controversial payments made by Channel 4 to ITV under the so-called "safety net" arrangements. These are worth about pounds 90m this year.

Some ITV companies might lessen the blow by seeking to negotiate lower licence fee payments to the Treasury, which they have a right to do from the end of 1997.

Still on TV, Channel 4 could find itself under pressure this coming year. Privatisation may have been put off, following a successful campaign by the chief executive, Michael Grade, to extol the public service mandate of the fourth channel. But there will be further questions about "public service" if Mr Grade continues to spend his hundreds of millions of pounds in advertising money on buying yet more Hollywood sitcoms and series.

But the immediate threat to Channel 4 (and ITV for that matter) is the launch of Britain's last "free" television service, Channel 5, which is expected to be on air by the end of March. The new channel will cost its backers pots of money - at least pounds 180m just to retune millions of VCRs up and down the country, a condition of the licence - but it will pay back in spades. With a potential audience of 80 per cent of UK homes, and nearer 90 per cent when you count households able to receive the signal via cable or satellite, Channel 5 will be a near-national service. It will probably lead to a growth in the overall advertising pie, but a large part of its estimated revenues will be poached from Channels 3 and 4. At the very least, that will put some downward pressure on the wildly inflated prices being charged per minute for commercial advertising, which rose by about 10 per cent (7 per cent in real terms) in 1996.

Meanwhile, consolidation of ITV will be on the agenda, even if the speed (or slowness) with which it occurs could surprise people. Yorkshire-Tyne Tees (to Granada), HTV (to United News & Media) and Grampian (to Scottish Television) are the most likely acquisitions. But in each case, the buyers don't like the high prices they would have to pay, and could decide to wait until much later to pounce.

The upshot, in any event, will be an ITV sector dominated by just two or three companies, able for the first time to present a common front as a truly national network. The implications for the current structure of ITV, with its federal vocation and its much-maligned Network Centre, will be radical. Indeed, there may not be a Network Centre at all, if some of the more reform-minded of the ITV barons get their way.

A general reform of ITV won't come a moment too soon, given the huge challenges that the launch of digital television will present. BSkyB, Rupert Murdoch's satellite service, wants to introduce 200 channels of TV programming and interactive services by the end of 1997. Digital terrestrial television will come a year later, while cable hasn't yet made up its collective mind. The huge fragmentation of the marketplace is bound to hurt traditional broadcasters, unless they themselves manage to secure a role in the digital age. So far, the only ITV companies that appear to be serious about digital are Michael Green's Carlton (which is bidding for a multiplex licence to operate a digital terrestrial service) and Granada, which has formed a joint venture with BSkyB to launch pay-TV channels.

To make matters more complicated for the commercial players, the BBC has rushed headlong into the digital age, having negotiated a joint venture agreement with US-controlled Flextech to launch pay-TV channels. These will compete directly with the programmes of commercial broadcasters, and could lead the digital field. After all, the BBC, despite its reputation for bureaucratic sclerosis, makes the best TV programming in Britain and - crucial in a crowded marketplace - has the best-known brand.

Elsewhere in the media, you can expect a few special situations to develop. Pearson will be in the news, as it struggles to agree a new strategy that could see a mammoth corporate restructuring. Newspaper companies will reap the benefits of lower newsprint prices, unless they decide to add new sections to the already groaning products that thump on coffee tables of a Saturday or Sunday. Of the main newspaper groups, both United News & Media and Mirror Group (which owns 46 per cent of The Independent) should see operating margins improve.

EMI, the music arm of the now demerged Thorn-EMI, is bound to be the target of a bid, and probably an agreed one. Favourites include MCA, the film and music giant controlled by drinks company Seagram, and the perennial predators, Disney and Bertelsmann.

Without a doubt, the media business, which has outperformed most other industries in the past five years, is set for another year of above-average growth. The uncertainties are rife, of course. but it would be no bad thing to stay overweighted.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
News
i100
Life and Style
food + drinkClue: You'll either love them or you'll hate them
News
Howard Marks has been diagnosed with inoperable cancer, he has announced
people
News
newsIf you're India's Narendra Modi, it seems the answer is a pinstripe suit emblazoned with your own name
News
peopleWarning - contains a lot of swearing
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project