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  • Ian Ritchie : Business AM

Commercial TV's own horror show

The TV industry is in turmoil, with the poor financial state of the ITV companies and Channel 5 leaving them wide open to predators

EVERYTHING LOOKS pretty normal when you switch on your TV these days. Coronation Street still pulls mass audiences to ITV1, Carol Smillie still supervises vandalism by neighbour against neighbour on BBC1. Behind, the scenes, however, the TV is in turmoil.

The current advertising drought has hit commercial television hard – ITV’s income is over £350m down on last year. To compound this, ITV rather stupidly paid £300m for the rights to broadcast the English Premiership football matches. With the failure of their prime-time Saturday highlights programme, and their inability to persuade Sky to pay much extra to show these matches on their satellite platform, the football deal alone will lose ITV a colossal sum.

Channel 4, being a public corporation without shareholders, can sustain a collapse in profits and can dip into reserves to some extent, but the ITV companies, and Channel 5, have no protection from market pressures. It is now becoming possible that the main commercial television companies in the UK might collapse, merge or be bought.

A few weeks ago in Edinburgh, Sir Robin Biggam, the chairman of the Independent Television Commission (ITC), said it was so bad that he urged the government to relax the rules which prevent further mergers, leading to a single company controlling the whole of ITV.

Unfortunately for the government, these shell-shocked companies are also responsible for delivering the core of the UK’s digital broadcasting strategy and ITV Digital, jointly owned by Carlton and Granada, is losing over £1m a day.

TV signals use a great deal of radio bandwidth. Switching to digital broadcasting technology makes it possible to provide dozens of channels using the same amount of bandwidth. Since the government charges a ‘spectrum tax’ on broadcasters for their right to broadcast, and more channels create more jobs and more wealth, the government is pretty keen to encourage them.

Ultimately, what the government would really like to do is switch off the analogue broadcasts entirely, freeing the frequencies for other uses, such as highly lucrative mobile phone licenses. But before they can do that, most of the population will have to have made the switch.

However, most observers now expect ITV Digital to fail. Carlton and Granada are likely to be forced to the conclusion that enough is enough and close it down.

So what future for the digital strategy? As it happens, the BBC has never been so strong. The license fee settlement gives the BBC above-inflation income for the next few years. With its certainty of funding, the BBC is able to invest hugely in programmes and new services which compete fiercely with the weakened commercial broadcasters.

The BBC plans to launch a low-cost digital set-top box for under £100, which will allow viewers without satellite or cable to get digital multi-channel TV, and they are planning to provide as many as a dozen free-to-air channels, including commercial offerings.

So, should we worry about all this? A key obligation of the ITV companies, including Scottish TV and Grampian, is to provide substantial amounts of locally produced content for their viewers. Most of these programmes lose money, and content that is bought-in gets higher audiences anyway. So the ITV companies have been lobbying the ITC to reduce their commitments.

There has been an admission from the ITC that ‘quality not quantity’ might become the watchword.

The commercial companies' poor financial state leaves them wide open to being acquired. RTL is believed to be planning to buy Carlton. Channel 5 is totally unsustainable as a stand-alone business. In these scenarios, Scottish and Grampian will eventually be merged into Granada, which already has a 20% stake in SMG.

Scotland would then become the only country in Europe without a single local television station. Given the current rather fractious relationship between Scottish politicians and the local media, maybe MSPs don’t really want much additional local coverage, but the lack of any kind of broadcasting policy for Scotland will surely become more and more noticeable.

Ian Ritchie is a director of Channel 4 – these are his personal views.

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