Tube License Renewals Cloud Everybody’s Biz

British broadcasting could be turned on its head by the end of the year.

Anything could happen. Even grandee ITV broadcasters like Thames or Granada TV could lose their franchises following this year’s sealed-bid auction.

Or it could be business as usual, with few franchises changing hands.

Few can predict how the competitive tender system, introduced by the government in its broadcasting act as the new method of awarding commercial tv franchises, will pan out. “It’s an absolute lottery,” confesses one media analyst advising both ITV and rival bidders. New 10-year franchises will begin in 1993.

What is clear is that the year will be marked by fear and distrust. And come the fall, when the regulating Independent Television Commission publishes its results, the nerves of even the most confident ITV exec will taxed to the limit.

For the first time, ITV stations will be allowed to take stakes in – and in some cases control – fellow ITV outlets. Most ITV companies will likely take advantage of this new opportunity, if only as a safeguard against losing their own franchises; the problem is, some may be taking stakes in rival bids against incumbents. “Trust” is not a word that will have much currency among ITV stations this year.

The sky’s limited

Although the future of all 15 regional stations and the national wakeup service is up in the air, one key issue of commercial television was decided somewhat earlier than expected: Rupert Murdoch’s Sky Television and British Sky Broadcasting merged after both concluded they couldn’t soak up further losses in a market that wasn’t big enough for the two of them.

The merger (axed BSB execs called it a “takeover”) has created a potentially powerful rival to the existing terrestrial webs and could have significant impact on British broadcasting. The combined British Sky Broadcasting reaches just 1.5 million homes, equal to the ninth-largest ITV franchise holder. However, advertisers are beginning to take it seriously.

The pace of BSkyB’s penetration (via dish sales and cable) is one of the many imponderables that ITV execs and their advisers will load into their computers to help chart ad revenues for the next decade so they can assess the size of their bids.

Also to be taken into account: how long the current recession will last; what effect new media outlets (commercial radio stations, cable webs, satellite tv services, a possible fifth national channel) will have on ad income; and the rising cost of talent as competition increases.

But the imponderables about the future landscape of British broadcasting are equaled by those concerning the rules of the competitive tender itself. In theory, once an applicant has passed stringent program and financial-quality hurdles (considerably beefed up during the passage of the act), the franchise should go to the highest bidder.

But there’s a joker (one of several) in the pack. The ITC has the discretion to award a franchise to a lower bid in “exceptional circumstances.” These might include maintaining continuity of the ITV schedule (and would thus favor major program contributors like Granada and Central), or where the proposed bid is of an “exceptionally high” standard.

In a recent interview, ITC chairman George Russell said he thought it would be more likely that newcomers would win smaller franchises, which supply little to the network. “Only a major company linked to independents already supplying programs to the BBC, Channel 4 or ITV has any chance of beating a Granada, Thames or LWT,” he said.

The industry is divided over how many bidders will line up at the end of April, when bids have to be submitted. David Murrel, senior partner of accounting firm Peat Marwick, claims the final figure will be close to 50, including the 16 ITV incumbents. Others say they will be surprised if more than a dozen contenders join the race.

The current economic downturn is one factor that could turn off some hopefuls. Another factor is the high cost of putting together a serious bid, estimated at about $5 million for a major ITV region (translating into boom days for accounting firms and media consultants).

Five challengers have thrown their hats into the ring: MAI, a business services group; Richard Branson’s Virgin Group; Carlton Communications; The Associated Press (which owns the Daily Mail and is therefore limited to a 20% stake); and a consortium of indie producers including Palace and Working Title and headed by giant diskery Poly-Gram.

Other likely contenders are the Chrysalis record and communications group; indie producer Diverse Prods.; Broadcast Communications; and the Trilion facilities group.

Media consultancy group GAH predicts that up to six current franchise holders will lose out. The best-placed challengers will be those linked with indie program suppliers who can match incumbents for quality and then outbid them, says GAH.

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