A merger too far 

1 January 2003 tbs.pm/1856

After several false starts and much rumour on the internet and in the City, and all the signs pointing to it in neon letters, Carlton and Granada have indicated that, come what may, they will merge ‘for the good of broadcasting’. Whilst this is no surprise, and at first glance is something the City seems to favour, there is a bigger picture here.

This has to have been the most predictable merger in television since the Yorkshire-Tyne Tees merger in 1993. Ever since we reached a Big Three – United News and Media, Carlton and Granada – everyone has been expecting a single ITV to be the predictable end of the merger line. Now, we have a situation where that could happen and we’ll have a big ITV player that could eventually buy out the other smaller players.

But is this the right move for ITV? Is this something that is really necessary or desirable? Is there any real benefit in this merger?

Business

In business terms, any savings that would be made by this merger will be severely limited. This is not a good thing, really. Shareholders, analysts and the business world will look at the very limited cost savings that will be made on this merger, and think “is the major trauma of a merger really worth it for these two companies?”

The answer is very likely to be no, as most of the possible cost savings that the deal could have brought have already been made by going to network continuity. What savings are left to achieve are very limited indeed, and are not likely to satisfy a business world that looks for cost savings on much larger scales than can be achieved by this merger. Add to this the fact that Carlton and Granada promised to put cost savings back into programming and you can see that in pure business terms, this merger is not going to go down all that well.

Further cost savings are fairly notional. Yes, a merger might reduce studio space, but that has already been cut to the point where even the BBC has to consider hiring space outside of its large real estate holdings. A merger might reduce numbers of staff, but like the famed government lies about “overstaffing” of the railways that turned out – only after thousands of experienced people had lost their jobs and dozens had died horribly because of it – “overstaffing” means different things to different people. To management it appears to mean any staff at all on the payroll. And since the majority of staff now appear to be on short-term contracts or freelancing, what “overstaffing” is there left to cut?

Problems

There are many other problems that would result from this merger. To date, only one ITV company has ever failed – Wales (West and North) Television back in 1964. The solution was simple, if ultimately of no benefit to the successor company – merge it with neighbour TWW. TVS, on losing its franchise, also plunged toward bankruptcy, for reasons of over expansion and desperate need to be a world player. Yorkshire used a similar solution to TWW/WWN in the 1970s to avert the same fate happening to them. They, together with neighbour Tyne Tees Television, had their joint sales house do a reverse takeover and back into the two of them to create a joint holding company known as Trident Television.

Right now, viewers are deserting the big five analogue terrestrial channels for reasons that continue to elude the programme controllers. These viewers head for the multitude of digital channels that are available on cable, satellite, terrestrial and even over the internet and produce schedules for themselves each night that are always funnier, more original and more intelligent than the terrestrial dinosaurs. There are even those viewers – an idea threatened since the early 1980s but now finally appearing – who are turning off TV channels altogether for the internet, videos, DVDs and computer games.

Now, let us suppose for a moment that for reasons of falling viewers, less revenue and spiralling costs, that this giant ITV company fails like Teledu Cymru did. It might be unlikely, but in the current circumstances, it is not impossible.

If it did fail, it would take almost a third of ITV off the air, and take out almost all of ITV’s production in one fell swoop. It would also take out a whole range of production for Channel 4, Channel 5, Sky and many other channels. Can the ITC, OfCom or even the government really allow this merger to go ahead, given Carlton and Granada’s track record with multichannels? Out of the 12 channels they have or indeed do own, 8 have gone to the wall. So did ITV Digital – an entire platform. Can the government ignore a track record that bad, to allow this merger to go ahead? If no other virtue can be seen in a regional network, the idea that a failure in one part will be covered from another seems to stand out. A national ITV could be another British Energy or Railtrack. But if a neighbouring franchise could step in, the embarrassment of a government rescue and a huge loss to the taxpayer – again – to repair a mistake by a previous government could be avoided.

And if this sounds far-fetched, remember that Teledu Cymru might be the only UK terrestrial channel to fail, but European broadcasting history is littered with the remains of services like La Cinq in France that blazed a bright but futile trail across the broadcasting world. But can the UK government learn the lessons it has so far missed? Only time will tell.

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