What have the regulators got against ITV?
No wonder ITV (LON:ITV) directors are angry with the Competition Commission. The company has a permanent seat at the competition regulator’s table, practically keeping it in business single-handed.
The latest anger is at the commission’s failure to relax the byzantine “contract rights renewal” that holds down the advertising rates charged by the struggling broadcaster. The formula was set when the Competition Commission reviewed the merger of Granada and Carlton to create ITV, but the company has hardly been out of the regulator’s office since.
British Sky Broadcasting’s (LON:BSY) purchase of an 18 per cent stake in ITV to save it from takeover by Virgin Media is the subject of a long-running inquiry with Sky still arguing against the commission’s order to sell its stake at a mammoth loss.
The contract rights renewal review has been running since last May. ITV’s plan for a video-on-demand service jointly with Channel 4 and BBC Worldwide – Project Kangaroo – was investigated from 2008 before being blocked by the regulator last year. Now there is the prospect of Project Canvas – another ITV video-on-demand plan with C4, the BBC, Five, BT and Carphone Warehouse – being referred by the Office of Fair Trading to the commission too. Meanwhile the Commission is investigating ITV’s sale of Friends Reunited.
And that is not ITV featuring in a mighty workload for the Competition Commission. Once the Sports Direct merger inquiry ends in February 2010, the only other work the commission is doing is the recently-referred inquiry into bus services.
Nor is the commission ITV’s only regulator. It is also subject to Ofcom’s rulings. New chairman Archie Norman is entitled to wonder whether the Competition Commission’s interest is personal. He has certainly made it so, describing its members as recidivists.
On contract rights he may have a point. The formula limits ITV’s ad rates to its share of the non-ITV audience, but with cable and satellite television fragmenting that audience it is increasingly irrelevant.
“Because the Competition Commission has failed to appreciate the seismic changes in the market over the last seven years it presumes that advertisers require the same level of protection and certainty that they enjoyed in 2003,” complains Norman. “This is clearly at odds with the overwhelming scale of change in the marketplace.”
The commission argues that the success of programmers like X Factor make it more important to protect advertisers. This is a penalty for success. No company is forced to advertise on ITV: if the broadcaster tries to charge too much it will lose its source of finance. Neither it nor its advertisers need to have rates set for them.
