ITV lifted by call for advertising review
OFT advises Competition Commission to consider changes to ITV contracts
Saturday 30 May 2009
ITV received a major boost from the Office of Fair Trading yesterday after it recommended a review of the burdensome rules that restrict the amount the commercial broadcaster can charge advertisers.
The OFT has advised the Competition Commission to "consider changes" to ITV's Contract Rights Renewal (CRR) Undertakings, which were imposed to address concerns that ITV would abuse its dominant position after the broadcasting giant was created through the merger of Carlton and Granada in 2003. CRR allowed advertisers and media buyers to keep their pre-merger contracts and also to cut the amount they pay ITV if its audience viewing levels fall. Shares in ITV rose by 1.75p, or 4.7 per cent, to 38.75p yesterday.
ITV – which has been hit hard by the advertising downturn and suffered losses of £2.73bn last year – has been lobbying for an overhaul of CRR for about two years, arguing that it led to underinvestment in high-quality, diverse programming that advertisers and viewers value.
John Fingleton, the OFT chief executive, said: "Changes in ITV's market position and programme delivery since CRR was introduced in 2003 mean it is now time to take another look at it. We recommend retaining some protection for advertisers and media buyers so that all parties have an equal playing field in what are challenging economic circumstances."
Michael Grade, the executive chairman of ITV who said last month he will step down and become non-executive chairman, has previously called the system a "straitjacket".
The broadcaster said: "ITV welcomes the fact that the OFT has now sent its report and recommendation to the Competition Commission in its review of CRR." ITV added that it will study the OFT's full report, once it is published, and provide the Competition Commission with detailed evidence to support the case for CRR's abolition.
The OFT yesterday said that while the market share of ITV1, its core channel, has declined, it remains the only provider of "very large" commercial audiences valued by some advertisers. As a result, the detrimental effects of the merger on the advertising market have not been "eroded completely".
In January, the OFT reached a preliminary view to recommend that the Competition Commission "relaxes" ITV's CRR restrictions and launched a consultation on the rules, inviting media buyers, advertising agencies and others to submit evidence.
This month, ITV said its first-quarter revenues fell by 14 per cent to £425m and revealed it would cut its programming budget further in response to tumbling advertising.
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