Memorandum submitted by Grampian TV and
Scottish TV (together referred to as SMG)
INTRODUCTION
SMG has always been in favour of the merger,
provided safeguards were put in place to protect against the adverse
effects of the emergence of one controlling entity within ITV.
By "ITV", SMG means the association representing the
15 different licensees under the ownership of five groups, soon
to be four. The other licensees outwith the merged entity will
be Ulster, Channel, Grampian TV and Scottish TV. The Competition
Commission concluded that the merger could be expected to operate
against the public interest of the other licensees. The merger
was cleared when undertakings were put in place intended to remedy
the adverse effects.
However, in its evidence before the Committee,
SMG is keen to highlight areas where it will look to Ofcom, as
regulator, to ensure that SMG is not disadvantaged by the operation
of the merged entity in other key areas, and not just within the
scope of the activities addressed by the undertakings.
NETWORKING ARRANGEMENTS
AND THE
INDEPENDENCE OF
THE NETWORK
CENTRE
The networking arrangements for Channel 3 flow
from the requirements of the 1990 Broadcasting Act (Section 39
and Schedule 4). They were designed to enable regional Channel
3 services, taken as a whole, to operate as a nationwide system
capable of competing effectively with other UK broadcasters, while
at the same time, ensuring that each regional licensee could meet
its regional commitments. They allow all licensees, through one
collective agent, ITV Network Limited ("ITV") (operating
out of Network Centre) to provide a national schedule and to commission
programmes centrally on behalf of all.
The Memorandum of Association of ITV states
that its purpose is to promote and protect the interests of its
members—all Channel 3 licensees. Its Statement of Principles
outlines the key concept that "as a federation of sovereign
broadcasters, ITV has inherent conflicts, since audience needs
can differ and commercial policies diverge. It is important therefore
that common strategies are pursued in a manner which respects
the requirements of regional companies and local viewers".
Its key principles are transparency and fairness in the commissioning
process, and an independent management, separate of any supplier's
interests. The independence of the Network Centre has already
been compromised by the appointment of the MDs of Carlton and
Granada as joint Chief Executives. Carlton and Granada have chosen
to rebrand the merged entity as ITV plc. SMG fears the commissioning
body will no longer be distinguishable from its biggest supplier.
Confusion will reign and those competing for commissions will
be disadvantaged by the lack of transparency in the commissioning
process. The ITV Network Director is a regulated post, and as
such, SMG requires that, post-merger, the independence of that
post should be reinforced.
The independence of the Network Centre and of
that regulated post is fundamental to the principles of the networking
arrangements and the health of the business of the other licensees
competing for ITV in-house commissions alongside that major supplier.
Only network commissions will further the creation of creative
clusters in the regions. Commissions should be awarded on merit,
but a meritocracy needs transparency, not conflicts of interest.
Ofcom has a statutory duty to promote competition and encourage
investment and innovation in the regions. Competition and investment
will be undermined if the independence of the Network Centre is
undermined.
REVIEW OF
THE NETWORKING
ARRANGEMENTS
SMG welcomes the imminent review to be carried
out by Ofcom under the Communications Act. The Act imposed a duty
on Ofcom to do so in the course of next year. In any review, Ofcom
has to take into account two factors. They are set out at Schedule
11, paragraph 7 of the Communication Act. Firstly, Ofcom must
ensure that the arrangements provide for a nationwide system of
services capable of competing effectively with other television
programme services (BBC/Sky). Secondly, it must take into account
the likely effect of the arrangements on the ability of licensees
to maintain the quality and range of regional programming. That
first arm is effectively covered, all the more so given the streamlining
and centralisation that will come out of the merger. This, therefore,
puts an onus on Ofcom to ensure that the second arm is given prominence.
It would not impair ITV's ability to compete to give SMG more
flexibility under the arrangements, but lack of flexibility through
restrictive arrangements in the form of onerous budgetary contributions
impairs SMG's ability to maintain that quality and range. "Maintenance"
has to have a dynamic aspect within it. In maintaining the range
and quality, Scottish TV and Grampian TV have to respond to the
increased demands upon them in terms of matching viewers' expectations
enabling them to compete in today's multi-channel environment.
Investment in the regions is critical.
REGIONALITY AND
INVESTMENT IN
THE REGIONS
There are obligations on the PSBs taken as a
whole, at network level, and there are separate obligations upon
regional PSBs. The Act imposes quotas, but SMG believes in regional
broadcasting in its own right, not for making up quotas.
SMG's channels cover two regions and a nation,
and it has the heaviest set of licensed regional commitments among
Channel 3 companies. Working with those licence commitments, SMG
strives to match viewer expectations to enable it to compete effectively
in a multi-channel environment. For this reason, SMG has always
had a strong focus on its regional output, but at the same time
has been driven to secure network commissions to protect and grow
its production houses. SMG is heartened by the drive under the
Communications Act to put network money back into the regions,
and move commissions out of London. Winning network commissions
is critical to the business of SMG, but it has never felt that
regional programmes should be poor cousins.
Grampian TV and Scottish TV meet and exceed
their licence obligations. Staff are motivated to produce programmes
that compete on the UK stage and that has meant greater collaboration
between producers of regional programmes and network programmes.
Grampian TV produced "Medics of the Glen". It won a
network commission, injected money and motivation into staff,
achieved a nationwide audience, and is enjoying overseas sales.
Regional programmes produced through schemes promoting independent
producers have won critical acclaim, such as the television film
"Afterlife". In summary, SMG's channels deliver
quotas, exceed quotas, and produce programmes which enjoy critical
success and have overseas sales potential. To continue to grow
its business for the benefit of the viewers in Scotland, and the
industry in Scotland, the post merger environment needs to promote
competition in the regions.
In conclusion, therefore, SMG looks to the regulator
and Ofcom's duty to encourage investment and innovation in the
regions. Firstly, SMG submits that the interests of its regional
viewers are not met by a narrow interpretation of regionality.
Guidelines for regionality should recognise quality and universality
of appeal, rather than focus too narrowly on region-specific issues.
Secondly, only an independent Network Centre will truly commission
on merit, and foster creativity in the regions. Post-merger, that
independence has to be re-asserted or the dominance of the merged
entity will stifle competition from the regions.
NETWORK COMMISSIONS
AND INDEPENDENT
STATUS
Through its network commissions, SMG supports
the independent sector in Scotland. SMG TV Productions is the
biggest network producer in Scotland, contributing on an annual
basis almost £20 million into the Scottish production sector.
SMG underpins the independent sector in Scotland.
SMG seeks support for an early review of The
Broadcasting (Independent Productions) Amendment Order 2003 in
the aftermath of the cleared merger for the purpose of assessing
whether the production arms of the Scottish licensees should be
classified as independent producers outwith Scotland. This would
promote competition as it would enable SMG to compete for network
commissions from other UK broadcasters as well as ITV. SMG is
disadvantaged outwith ITV as there is no incentive for those other
broadcasters to commission to meet quotas. In a post-merger environment
SMG is further disadvantaged within ITV as it will not be commissioned
to meet independent quotas and will have to compete with the major
supplier for the remainder of commissions. That becomes much harder
against a dominant player. SMG's ability to compete both within
ITV, and outwith it, will be enhanced if it were classed as an
independent producer. The Communications Act makes provision for
the Secretary of State to amend the Order. The rationale for denying
SMG independent status no longer exists. SMG is a tiny player
in the broadcaster of which it is a member.
8 December 2003
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