C4 merger rumours rife as RTL chief misses festival

Edinburgh Television Festival: Bosses sail on 'choppy waters' as they discuss future of broadcasting

As the television industry gathered for its annual soul-searching session in Edinburgh yesterday, executives faced some of the most difficult challenges to confront the industry in years. The possible Channel 4/five merger, the poor ratings and absence of an advertising rebound at ITV, the BBC in post-Hutton/charter renewal mode, BSkyB having to confront a collapse in its share price and faltering audiences at its flagship Sky One.

As the television industry gathered for its annual soul-searching session in Edinburgh yesterday, executives faced some of the most difficult challenges to confront the industry in years. The possible Channel 4/five merger, the poor ratings and absence of an advertising rebound at ITV, the BBC in post-Hutton/charter renewal mode, BSkyB having to confront a collapse in its share price and faltering audiences at its flagship Sky One.

"There are quite a lot of choppy waters that everyone is trying to navigate," David Elstein, the former chief executive of five, said.

The biggest buzz was caused by the absence of Gerhard Zeiler, the chief executive of the pan-European broadcaster RTL, who was due to give "The Worldview Address", one of the highest profile slots at the gathering.

The absence of an Austrian television executive would not normally trouble the British media establishment but RTL is in a central position in the broadcasting landscape in Britain. It is five's majority shareholder and will decide its future, including any merger with Channel 4.

The official word was that Mr Zeiler was ill. Others wondered whether there was more to it than that. It was expected that he would use the conference to meet senior management from Channel 4, particularly its new chief executive Andy Duncan.

One industry figure at Edinburgh whispered: "Is he really ill or did he not want to discuss the merger? Or does this mean that the merger discussions have already taken place?" Certainly the blurb in the conference brochure, which included an interview with Mr Zeiler, suggested he was keen to press on with merger negotiations. "We are looking to grow the channel [five].... We want to develop a multi-channel strategy. We are looking at all options and talking to a lot of people," he said in the interview.

This year's conference was noticeably less business-orientated, with the emphasis back on programming, from the keynote speech (given last night by the BBC journalist John Humphrys) onwards. After last year, when Sky's then chief executive, Tony Ball, gave the address (a vicious assault on the BBC), the satellite company appeared to be keeping a low profile. Sky launched its autumn schedule this week, which includes a new US drama series Deadwood.

With the non-appearance of Mr Zeiler, the most obvious point of interest to a business audience was a session at the three-day event today that will feature Charles Allen, the chief executive of ITV. Though he has delivered a near-perfect merger for ITV and is bringing through higher-than-expected cost-savings, the City and the industry continue to question how long he will lead the broadcaster.

ITV has seen its lowest-ever shares of the television audience this summer and advertising revenues have not rebounded convincingly, leading some to wonder if it is suffering a structural decline in advertising sales, rather than a cyclical downturn. The lowly share price is again leading to bid speculation.

With the media regulator Ofcom investigating the future of public service broadcasting, the renewal of the BBC's charter coming closer and multi-channel television now in half of British homes, the future of the television industry seems up for grabs.

The most promising conference slot examining these "blue skies" issues will see the coming together today of Dawn Airey, the head of content at Sky, Mick Desmond, the chief executive of ITV Broadcasting, Channel 4's Mr Duncan and Jane Lighting, the chief executive of five.

One news report yesterday suggested Sky had entered the bidding to buy the Hallmark channel in the UK. It would be the first time that Sky had bought a television channel. The US parent Hallmark company has put its international assets up for sale and a consortium led by David Elstein is reckoned to be in pole position to buy the business for $300m. Mr Elstein declined to comment.

Industry sources said that though Sky had shown interest in the UK entity, Hallmark wanted to sell the assets as a group. Also, disposing of just the UK channel - said to be worth about £90m - would trigger a sizeable tax charge.