Very messy merger

ITV ratings cheer can't cover NTL bid fears

LONDON — Just when it looked as if ITV finally had some good news to impart thanks to a promising fall schedule, the uncertainty surrounding the embattled broadcaster is reaching an all-time high.

Not only is ITV minus a chief executive after Charles Allen bowed to stockholder pressure and quit Oct. 1, but its very existence is in doubt as Nasdaq-quoted U.K. cable giant NTL pursues its ambitions to buy ITV and create a £9 billion ($17.1 million) behemoth to rival Europe’s leading pay box, BSkyB.

“The ship is rudderless,” says a former senior ITV executive. “At least with Charles you knew where you were; now no one knows what is happening.”

NTL’s putative bid for ITV is the second considered this year by the broadcaster’s board, said to be at loggerheads over the qualities Allen’s successor must have.

In April, a private equity bid backed by Goldman Sachs and led by U.K. webhead Greg Dyke was turned down because the price — £1.30 ($2.45) a share — was too low.

A few months later, ITV’s stock price dipped below the psychologically important £1 ($1.88) mark, as audiences for flagship web ITV1 hit a record low. Allen’s position became untenable and in August he announced his departure.

ITV1’s fall schedule is traditionally its strongest. This year’s is off to an encouraging start.

A new series of talent reality show “The X-Factor” and revivals of flagship dramas “Cracker” and “Prime Suspect,” plus a more upbeat mood from Blighty’s producers concerning ITV’s ability to take creative risks, suggested an ITV revival might be in the offing.

“One way we measure ITV’s performance is by our ability to launch new brands,” says ITV’s director of TV, Simon Shaps, speaking last week in London at the European Media Leaders Summit.

“This year so far we have launched 25 new titles that have achieved an audience of 5 million or more. And that’s about 24 more than Channel 4. A lot of channels find it incredibly difficult to launch new brands.”

ITV’s brand-defining content — in primetime, ITV1 remains the U.K.’s most popular web — is one thing that makes the broadcaster attractive to NTL, which, despite owning program arm Flextech, cannot begin to match ITV in terms of premium content.

So what would ITV, whose spinoff webs are damaging rivals, gain from merging with NTL?

“Frankly, it’s hard to see what benefit ITV would get from this strategically,” says ex-Carlton TV program director Steve Hewlett.

“It doesn’t need NTL’s distribution network. It is hard to see how a merger would enhance the value of ITV.”

This view is widely shared by analysts and, not surprisingly, by Rupert Murdoch, chairman of BSkyB, the company that arguably has the most to fear should the merger happen.

Speaking at a conference in Barcelona last week, Murdoch said: “None of the things NTL is missing is in ITV and none of the things ITV is missing is in NTL. This doesn’t seem to be a set of solutions for either side.”

Reportedly, although ITV denies it, NTL’s overtures have put the search for a new CEO at the broadcaster on hold.

At this stage it is impossible to predict if the merger will succeed. Indeed, it could run afoul of antitrust rules, as the merged company would own rights to a back catalog containing a portfolio of premium shows so vast that rivals might regard it as unfair competition.

However, NTL’s interest in buying the beleaguered broadcaster is a reminder that despite its woes — ITV1 has lost share faster than any of its British terrestrial rivals — it remains uniquely valuable to audiences and advertisers.

“The truth is that ITV1 is still more dominant in the U.K. than any U.S. terrestrial broadcaster is in its home market,” says Matthew Horsman, founder of media research outfit Mediatique.

“Counting its multichannel extensions, ITV has more than 45% of the commercial advertising market for TV in the U.K.; no U.S. network has more than 15%.”

He adds: “By 2012 (when the U.K. will switch to digital), ITV1 may be the only place where mass-market advertisers can go — maybe not for the younger demographic that is tuning out of TV, but certainly for the rest of us.”

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