The regulatory hurdles have been jumped. Michael Green has been sidelined. Now, at long last, Granada and Carlton can get on with the business of creating England's first single ITV company.
Although the emerging ITV plc needs a permanent replacement for Mr Green, after appointing Carlton board member Sir Brian Pitman as interim chairman last week, it faces a far more urgent challenge. It must create a single sales house in time to negotiate next year's advertising deals with clients and their agencies - and it's already two months behind schedule.
Trade Secretary Patricia Hewitt approved the merger a month ago, giving the new company little time to finalise its 2004 advertising agreements before the traditional pre-Christmas deadline. Ms Hewitt also attached a couple of conditions to the merger to cover its most contentious element: ITV's sales operation, which will control 52 per cent of the TV advertising market.
For the next three years, ITV must allow advertisers to renew their 2003 airtime deals if they dislike any new terms offered by the single sales house. Advertisers will also be allowed to cut the amount they spend on ITV in line with any drop in its audience.
Last Friday, industry regulator Ofcom sent Ms Hewitt its summary of how this contract rights renewal (CRR) remedy should work. Early this week, she is expected to endorse its plan. At the same time, Ofcom is revising airtime sales rules and appointing an adjudicator to arbitrate between buyers and sellers, in essence protecting the interests of advertisers dealing with the single ITV sales house.
This has to be set up by the start of December, and interviews for the posts of chief executive and head of sales took place last week. Granada's sales chief, Graham Duff, is tipped to take the top job, while Carlton's Simon Pardon is expected to become head of sales.
But are advertisers - for whom all this is being done - happy? Procter & Gamble is the UK's biggest TV advertiser and it originally opposed the merger, fearing a single sales house would abuse its dominant market position. Now, though, it is more sanguine. "In principle the CRR remedy does allow advertisers to trade on a consistent basis," says P&G media director Bernard Balderston. "But there's a lot of detail that's not worked through."
The detail covers flexibility in advertisers' ITV deals if they either change target audience or move their account from one agency to another. This is where the adjudicator comes in - but it won't always be good news for advertisers.
"There will probably be less flexibility, but we've got to make the remedy work as best we can," says a spokesman for the Incorporated Society of British Advertisers, which also originally opposed the merger. "If agencies and advertisers currently have a good deal, that's great, because the remedy protects that for the future. Others will be disappointed if they think they haven't had the best deal this year."
Some are predicting that few clients will decide to stick with this year's terms of trade. "CRR is supposed to be a fallback position. If you infer from that that everybody is at liberty to negotiate new deals, this is going to be an extremely busy period," says Chris Hayward, head of TV at ZenithOptimedia, the biggest media-buying agency.
Buyers estimate that 85 to 90 per cent of ITV's £2bn advertising business is up for renegotiation this year. Those clients that do renegotiate face a tough battle trying to reduce their spend. Carlton's sales chief executive, Martin Bowley, is bullish: "ITV is in a terrific position regardless of who's in charge, of CRR or anything else. "We will hold peak share next year, ITV2 is flying and we have key games from Euro 2004 [the football tournament], so we're very optimistic."
Whatever deals are done with market leader ITV will affect Channel 4, Channel Five and Sky. They're trying to treat this year's negotiations as normal, but privately admit the ITV merger will alter their sales strategies in the long term.
Moves to merge sales operations are likely to follow corporate tie-ups, however. So the sale of Flextech, the content arm of cable company Telewest which is currently on the market, would precede a merger of its sales operation IDS, rather than the other way around.
There's also powerful logic for a merger between BSkyB and Channel Five, although shareholders Bertelsmann and United Business Media don't seem interested so far. Channel 4 would prefer to maintain a standalone sales operation; it offers disproportionate levels of 16- to 34-year-old viewers and so holds 20 per cent of the TV advertising market with just 10 per cent of the audience. But it will consolidate if that's seen to be in its long-term interests. "Conversations have been had and the general feeling is there will be further consolidation," says a Channel 4 source.
A Sky source says it is also "keeping its options open".
Despite the uncertainty, and research suggesting that the cost of advertising on ITV will rise, some feel the merger may not unduly affect next year's market. "Everyone is overestimating the impact it will have on sales. The remedies have covered every possible scenario for abuse," says David Peters, broadcast planning director at media buyer Carat.
ITV certainly isn't worried. "Because of the CRR remedy, the pressure is fully focused on the schedule and programme investment and the ratings those deliver. That's where the action is, not in a single sales house," says Carlton's Mr Bowley.
Some buyers are up for the fight, though, believing the adjudicator will back them over ITV in this first year of the new system. "As long as the remedy is unambiguous, we say let's get on with it," says Chris Boothby, negotiations head at media agency Vizeum.
"We'll be going into talks with ITV as tenaciously as we've always done. CRR says that ITV will not take an increased share of revenue over the next three years. That puts ITV in a slightly tougher situation than it's been in before."
The ITV merger has put Britain's main commercial network in a commanding position. But it is going to have to fight hard to maintain it.Reuse content