Select Committee on Culture, Media and Sport Appendices to the Minutes of Evidence


Memorandum submitted by Granada plc


  1.  Granada welcomes this opportunity to participate in the Select Committee's inquiry into the Communications Bill. Granada endorses the ITV submission to the Committee. This paper focuses on those issues of particular concern to Granada that are not covered in the ITV submission.

  2.  Granada is the UK's leading commercial television broadcaster and producer, with strong positions in content creation, free-to-air broadcasting and pay-TV.

  3.  Granada holds seven regional ITV licences—Granada Television, LWT, Yorkshire Television, Tyne Tees Television, Anglia Television, Meridian Broadcasting and Border Television. Granada also has interests in GMTV, SMG and ITN.

  4.  Last year Granada made 60 per cent of ITV1's original commissions in all genres, including Coronation Street, Cold Feet, Trisha, A Touch of Frost, Where the Heart Is, Popstars, The South Bank Show and Jonathan Dimbleby. In addition, Granada produces some of the most successful programmes on other UK channels, including The Royle Family and What the Papers Say for the BBC; and Countdown and The Six Wives of Henry VIII for Channel 4.

  5.  Together with Carlton Communications, Granada owns ITV Digital, the digital terrestrial television (DTT) platform. Granada also has interests in a number of pay-TV and free-to-air channels and broadband.

  6.  Internationally, Granada has established production bases in Australia, the United States, Germany and the Far East. Programmes from Granada's massive programming archive are distributed to more than 120 countries.


  7.  An overhaul of media regulation is long overdue. The full Communications Bill is unlikely to be enacted before 2003 at the earliest, five years after the original green paper, Regulating Communications.

  8.  Reform of the ownership restrictions on ITV is even more pressing. A more sensible regime, that allowed further consolidation, would have significant benefits in terms of ITV's ability to compete at home and in new markets. Consolidation would release significant back-of-house savings, eliminating off-screen duplication and inefficiencies. A consolidated ITV would also be better able to tackle the strategic challenges posed by the transition to digital.

  9.  The Government proposed removing the statutory barriers to further ITV consolidation in its Communications White Paper in December 2000. Government support for removing the 15 per cent audience share limit and the London licence rule is even more explicit in its recent consultation paper on media ownership.

  10.  There is a clear consensus in favour of early movement on ITV ownership, spanning all major political parties, the Independent Television Commission (ITC) and the BBC. Sir Robin Biggam, the Chairman of the ITC, recently called for Government to introduce "interim legislation" to reform the television ownership rules[15]. Similar sentiments were expressed on all sides of the House of Lords during the recent passage of the Office of Communications Bill[16]. The Conservative broadcasting spokesman has also announced his intention to table a short bill relaxing ITV ownership restrictions early this year[17]. Granada would support the ITV ownership restrictions being lifted at the earliest possible opportunity.

  11.  The case for swift action on ITV ownership has gained weight due to changing economic conditions and developments in the UK broadcasting sector. The ITV companies are facing a series of formidable challenges that have opened up a substantial imbalance in the UK broadcasting ecology.

  12.  ITV is going through the most serious revenue downturn in its history. ITV's advertising revenues fell by £250 million last year. At the same time, ITV is being squeezed by a BBC in receipt of an annual 1.5 per cent real terms increase in the licence fee. The BBC's spending power will be boosted by £200 million every year to 2006-07, thanks to an unprecedented seven year settlement.

  13.  Unlike any other UK broadcaster, ITV pays a full price for its access to the analogue terrestrial spectrum. The ITV companies paid around £300 million in licence fees last year alone. The major ITV companies, Granada and Carlton, have also been building the UK digital terrestrial platform, ITV Digital, through its most expensive phase of development, spending around £300 million on the project last year.

  14.  With digital competition also intensifying, ordinary competition law, rather than specific ownership rules, should be sufficient to safeguard the interests of advertisers and viewers within analogue terrestrial television. Any proposed ITV mergers would naturally remain subject to examination by the UK's competition authorities.

  15.  Ownership consolidation should not affect ITV's commitment to the regions. Granada regards sustaining regional production and broadcasting as central to ITV's public service role. All Granada's ITV licensees comfortably exceed their basic licence requirements for regional programming. Under the regulatory structure outlined in the Communications White Paper, ITV licensees' regional obligations would remain in force, even if the number of ITV companies reduced further.

  16.  Restrictive ownership rules have hampered the ability of UK commercial broadcasters to compete internationally. The restrictions preventing unified ownership of the main commercial channel, ITV, are without parallel anywhere outside the UK[18]. The greater efficiency and scale achieved through consolidation will improve ITV's ability to compete and expand into new markets.


  17.  ITV faces unique constraints in selecting its own news service due to the "nominated news provider" system. The same rules also restrict ITN's ownership structure. As a major shareholder in ITV and ITN, Granada supports the removal of the Channel 3 nominated news provider system in its entirety.

  18.  The Government believes that "the nominated news provider system has a role to play in ensuring impartiality and plurality"[19]. However impartiality of news services is separately protected by the ITC Programme Code, which sets out in detail rules governing impartial treatment of news issues. The code also rules out commercial interests impinging on editorial judgement.

  19.  ITV licensees are additionally required to include "news programmes of high quality dealing with national and international matters." The ITC has shown itself ready to intervene to ensure that these commitments are met. The regulator itself has questioned the need for the nominated news provider system on top of these powers.[20]

  20.  The Government suggests lifting the ownership cap on the ITV news provider rules from 20 per cent to 40 per cent. Full deregulation would make more sense. There are no equivalent limits on any other UK broadcaster or news provider. Any limit creates uncertainty and could place a brake on long-term investment. The structural separation also makes provision of an integrated regional, national and international news service more difficult. Lifting the cap would allow ITN management and its shareholders to arrive at the best structure for the company, its clients and UK news viewers.

  21.  The nominated news provider rules do not protect ITN. Other providers can— and have—achieved NNP status and challenged ITN for its core ITV news contract. Abolishing the nominated news provider system would allow ITV to normalise the relationship with its news supplier and would provide the strongest long-term bulwark against concentration of television news provision.


  22.  The exceptional circumstances currently facing commercial television have exposed the lack of flexibility in the ITV licensing regime. Under current broadcasting legislation, the regulator has no way of varying the financial terms of ITV licences to take account of massively changed economic circumstances. This is unlike the position that exists in many other regulated industries, including water and energy.

  23.  Notwithstanding the unprecedented advertising downturn, ITV companies paid around £300 million last year in licence fees. All ITV licences have recently renewed for a further 10-year licence period. Licence renewal involved the regulator setting licence payments, rather than companies bidding as in the previous licensing round. The regulator set the franchise fees before the depth of the current downturn was apparent. The licence fee terms are fixed to at least 2006. Without adjustment, the ITV companies are set to overpay by several hundred million pounds over the next five years.

  24.  The Government should urgently consider introducing greater flexibility into the financial terms of ITV licences. If possible, this measure could be advanced ahead of the full Communications Bill. This suggestion received cross-party support in the House of Lords during the passage of the OFCOM paving Bill.

15 January 2002

15   ITC Chairman calls for fast legislation, 17 October 2001. Back

16   eg Lords Hansard, 22 November 2001, columns 1246-1305. Back

17   Yeo: I propose to modernise media competition rules, Conservative Party PN 2 January 2002. Back

18   Germany operates a national TV audience share limit of 30 per cent. In Italy, Mediaset's three national networks have 45 per cent peak audience share and 60 per cent of TV advertising revenues. Back

19   Consultation on Media Ownership Rules, DCMS/DTI, November 2001. Back

20   Response to consultation on proposals for reforms, ITC, page 17. Back

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