Mathew Horsman on the future for ITV

For Britain's commercial TV broadcasters, the next 18 months are likely to be dominated by an increasingly rancorous debate over licence fees, levies and taxes.

We have all heard, ad nauseam, about Michael Grade's crusade to end the controversial levy paid by Channel 4 to the ITV companies, which Grade says is a penalty on success that keeps him from financing hit films, making good drama series and sponsoring investigative tele-journalism. (He doesn't mention all those US sitcoms, but let it pass).

But we have heard less about the ITV case, which has sufficient merit to rehearse here. When the ITV companies bid for their licences under the market-driven 1990 Act, they calculated how much they would earn from advertising over the 10 years of the franchise. They also knew that if Channel 4 was particularly successful at winning market share and hence a bigger slice of advertising revenues ITV companies would be compensated under the levy.

And so it has proven. Once it hit 14 per cent share of advertising Channel 4 was required to pay half the excess to the ITV companies and a quarter to an insurance fund, now topping pounds 80m, that acts as a cushion against future troubles. ITV has benefited to the tune of pounds 169m - being the amount paid by Channel 4 to the Channel 3 companies so far.

The Government is now minded to give Channel 4 at least part of what it has been seeking, agreeing to freeze payments to the insurance fund. That gives Grade another pounds 17m to play with, so maybe he can help to finance another Four Weddings and a Funeral.

But the revolution is still to come, with the prospect of an end to the levy altogether. How fair on the ITV companies is that?

After all, they did their calculations back in 1991 on the basis of the Channel 4 levy. Surely, they should not now be made to suffer?

I agree it is hard to feel sorry for monopoly TV companies with guaranteed profits. It is the regional monopoly nature of the ITV system that led to the licence fee concept in the first place. The Government quite rightly decided that if private companies were going to make a killing out of a state-granted monopoly, then the returns to shareholders ought to capped in some way - through a combination of taxation, the payment of a Percentage of Qualifying Revenue (PQR), and the cash bid.

My only point is that one should not change the rules suddenly and without due regard to the effects on all the players. Far better would be to look at the TV market as a whole, and decide how to make the change smoothly and fairly. That probably means leaving the levy in place until 1998, when it can be reviewed at the same time as the ITV franchise holders can renegotiate their licence payments. This is the "rebalancing" approach, and it makes a good deal of sense.

The Independent Television Commission will be in talks soon with those companies wishing to renegotiate their payments, as foreseen in the 1990 Broadcasting Act. Obviously, those who bid very high - like Yorkshire- Tyne Tees and HTV, will be lining up to lower their annual payments. Low bidders, like Central, will be happy to wait until 2001, the end of the current licence period. The ITC will be making a careful, no doubt well- researched analysis of the changes in the marketplace - market share, advertising revenue - that are bound to have taken place since the advent of cable and satellite and the pending launch of the new Channel 5.

It will be up to the ITC to decide whether the franchise holders can meet their programme quality requirements on the likely revenues they will receive. That determination will doubtless lead to lower payments for some of the high bidders, and the Treasury will see its total take from commercial television drop, by many millions of pounds a year.

But we are still a long way from resolving the question. Channel 4 will continue to push for an early end to the levy, while the Channel 3 companies will want to put it off for as long as possible. The ITC will take advice, and will be lobbied from every direction. There will be plenty of indignant noise from all quarters. When the dust settles, there will be two outstanding questions for the Government to contemplate. The first is to determine the future status of Channel 4. If it gets to keep all its extra money, it will be an even bigger force in the television market. It will be able to make more expensive programming, thereby winning bigger audiences, thereby receiving more advertising revenue. It becomes hellishily difficult to judge what the effect will be on Channel 3 companies, which already complain that Channel 4 is really just Channel 31/2 - ratings- driven and populist, rather than adventurous and public interest-minded. Shouldn't the fourth channel become a commercial broadcaster like the others? It acts increasingly like one now, so why maintain the tattered fiction?

The second outstanding issue concerns the cable and satellite markets. If the Government is to tax the monopoly profits of commercial broadcasters through PQR, why shouldn't the cable operators and Rupert Murdoch's BSkyB pay extra too?

Mainstream economists will react with horror. After all, satellite was a huge risk for its backers. It was not a "licence to print money" like the ITV franchises. BSkyB and the others should be taxed like any other company.

But will a future Labour government agree? Even City analysts are beginning to wonder whether Sky's huge profits are really safe, as a new report from Hoare Govett, the investment firm, will show tomorrow.

Applying similar taxation (including a levy on advertising revenues) to all broadcasters might prove irresistible to a cash-hungry government safely in power and no longer so worried about angering Mr Murdoch and the editors of his Fleet Street newspapers.

Suggested Topics
PROMOTED VIDEO
Have you tried new the Independent Digital Edition apps?
News
ebooksAn unforgettable anthology of contemporary reportage
Life and Style
tech

Board creates magnetic field to achieve lift

News
There have been various incidents of social media users inadvertently flouting the law
news

Life and Style
Stack ‘em high?: quantity doesn’t always trump quality, as Friends of the Earth can testify
techThe proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
News
Bourgogne wine maker Laboure-Roi vice president Thibault Garin (L) offers the company's 2013 Beaujolais Nouveau wine to the guest in the wine spa at the Hakone Yunessun spa resort facilities in Hakone town, Kanagawa prefecture, some 100-kilometre west of Tokyo
i100
Sport
CSKA Moscow celebrate after equalising with a late penalty
footballCSKA Moscow 2 Manchester City 2: Premier League champions let two goal lead slip in Russia
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 Media

Head of Ad Sales - UK Broadcast

competitive + bonus + benefits: Sauce Recruitment: An award-winning global mul...

Trainee Recruitment Consultant

£18000 - £30000 per annum + uncapped: SThree: Do you feel your sales role is l...

Trainee Recruitment Consultant

£20000 - £45000 per annum + uncapped: SThree: Key featuresA highly motivated ...

Vendor Services Manager (IT) - Central London

£50000 - £55000 per annum + benefits: Ashdown Group: Vendor Services Manager (...

Day In a Page

Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London