Nice to see the Office of the Adjudicator (Contract Rights Renewal) awarding itself a hearty pat on the back in its latest report. True, there was no official CRR complaint received during the April-to-September period covered by this document. But that may be down to the fact that all the guidance inquiries received by the office (28 of them) were efficiently handled to the satisfaction of all concerned.
And, yes, it's true that the airtime market is never very emotionally charged during the summer. But we're on the threshold of more interesting times. With ITV1's audiences down substantially against lucrative young male demographics, the network may be tempted to push its luck in the 2005/2006 negotiation season - and play a little more hardball than we've seen of late. Not for nothing has the ITV chief executive, Charles Allen, been lobbying to have CRR abolished.
So it's no surprise to find that the most interesting aspects of this report concern preparations that the Office of the Adjudicator is making for the battle ahead.
The battleground is likely to shift to conditional selling - an issue not officially within the adjudicator's remit. Yet. The final sections of the document reveal that media agencies (as canvassed by the IPA) would now like "to see the adjudicator's role expanded to include the ability to get involved in disputes not specifically covered by CRR, but where ITV is trading in a way that abuses its dominant position".
Tellingly, it also reproduces an ISBA statement revealing that advertisers "believe the adjudicator could have an important role informing Ofcom's interpretation of ITV plc's current and future business strategy".
1. Carlton and Granada were allowed to merge only if the new, single ITV accepted a remedy to counter its dominant position in the UK's TV airtime trading market. This remedy, known as Contract Rights Renewal, was designed to allow advertisers and agencies to keep trading with ITV on the same terms as they had previously traded with Carlton and Granada, thus outlawing any abuse of ITV's near monopoly of mass audience peaktime ad breaks.
2. The remedy also required the appointment of an adjudicator to rule on any CRR disputes arising between media agencies and ITV. David Connolly, the former vice-chairman of Starcom Motive, was appointed to the role in November 2003. In his early career, Connolly had sold airtime and he was known as a tough negotiator - seldom inclined to be impressed by ITV's more unsubtle negotiating gambits.
3. Very few disagreements between media agencies and ITV have reached a formal complaint-referral stage - there were, for example, only three in the first six months of CRR.
4. To date, the adjudicator's main role has been to offer guidance to agencies on how to interpret detailed provisions of the CRR undertakings. There were 103 inquiries in the first 16 months of the CRR's operation. The biggest potential interpretation problems arise, for instance, when an account shifts to a new agency.
5. Strangely, though, the adjudicator's report admits that it can't entirely be sure that the market is trading to the complete satisfaction of both buyers and sellers - many of the contracts it is asked to advise on are unsigned drafts. In fact, a significant proportion of the market is now being traded on a non-contract basis. This could have alarming consequences if trading relationships ever begin breaking down.
6. If ITV1's commercial audience share declines, CRR ensures that its share of revenue declines also. ITV's short-term strategy has been to recoup its losses on ITV1 by attracting advertisers to its digital channel portfolio - ITVs 2, 3 and 4. Some observers believe ITV is leveraging its market dominance to sell these channels on an "all or nothing" conditional basis.
7. If the adjudicator begins lobbying for more power in overseeing such issues, its efforts may dovetail with a more fundamental Ofcom investigation into airtime trading practices. Ofcom recently appointed a consultant to define the extent of such an exercise - and the goal is to conduct the investigation next year and produce a report in August. Ofcom could then seek to outlaw such practices as agency deals as well as conditional selling.
WHAT IT MEANS FOR ...
MEDIA AGENCIES
- The Office of the Adjudicator notes with interest that there seems to be little consensus among agencies as to the extent of conditional selling. Or, indeed, if it represents any problem at all.
- That's perhaps because for every instance of conditional selling there is at least one instance of conditional buying. Agencies are well aware that some of their traditional practices, for instance, agency deals, may not bear detailed scrutiny.
- Media agencies and the IPA will no doubt find it in their interests to be complicit in Ofcom efforts to keep ITV on the back foot. But they might regret it if they contrive to give more power to an airtime policeman on a permanent basis.
ITV
- In September, the ITV chief executive, Charles Allen, began lobbying to have the CRR abolished or modified - a development that, to some advertiser and agency observers, was rather insulting.
- The network will no doubt be dismayed to read between the lines of this latest report for the Adjudicator's Office. It's quite clear that agencies, advertisers and Ofcom are likely united in their desire to keep ITV under close scrutiny.
- 2006 could be a tough year for ITV's sales teams.