The OFT's advice to the Compet-ition Commission signals that ITV has failed to convince its committee to abolish CRR completely, following a 16-month investigation. The OFT's ruling that CRR - the mechanism that governs the price it can charge advertisers - should be revised has been tentatively welcomed by many advertisers, agencies and rival broadcasters, although all note the final decision rests with the Competition Commission.
The UK's largest commercial broadcaster believes the mechanism has cost it about £300m in the past six years and outgoing executive chairman Michael Grade refers to it as a "straitjacket" that is holding the company back in the worst economic downturn since the early 1990s.
Yet, the OFT noted that ITV remains the main provider of large commercial television audiences in the UK and, as such, requires regulating to ensure "an equal playing field" in negotiations.
Chris Hayward, head of investment at ZenithOptimedia, believes it signals "a bit of a rethink" by the regulator, which earlier in the process "had seemed keen on scrapping CRR". This sentiment is echoed by Geoff Russell, director of media affairs at the IPA. He said the acknowledgement that some sort of protection for advertisers is still required was "a victory of sorts", brought about by the level of concern expressed by agencies and advertisers.
However, Kelly Williams, director of sales at Five, was less celebratory, noting there are "still a few cards left to play" and that ITV will be doing "everything it can to gain an advantage". He added: "Any regulation should be strengthened, not relaxed."
Similarly, Channel 4 believes CRR should remain until ITV1 delivers less than 25% of total TV revenue. Currently, it stands at 40%.
CRR works by allowing advertisers to vary the share of their budget they spend on ITV1 in direct proportion to ITV1's share of commercial impacts. Chris Locke, group trading director at Starcom MediaVest Group, speculated that a revised mechanism may end up being based on volume, not share, and include day-part pricing. "ITV has always wanted to bring in peak loading," he said.
The chance of a quick resolution is unlikely. A Competition Commission spokesman said it is set to take "four to five months", which could still pave the way for any "son of CRR" to be in place before this winter's TV ad trading season.
ITV welcomed "the fact that the OFT has now sent its report" to the commission and will study the detail of the full report and provide the Competition Commission with legal, economic and market-based evidence to support the case for abolition".
Ian McCulloch
Consultant, ex-ITV commercial director
"There has to be protection for advertisers, but, equally, ITV must be allowed to generate the ad revenue needed to provide the big ratings. ITV can only generate big ratings if it can invest."
Geoffrey Russell
IPA director for media affairs
"The OFT has appreciated the amount of power ITV still holds. Everyone wants to see a healthy and vigorous ITV, but this does not mean granting it complete freedom to exploit its market power."
OFT's views on CRR...
- OFT wants CRR to be changed, not abolished
- But it believes ITV1's market position has "eroded", meaning "a less burdensome remedy" is needed
- Some, including the IPA, wanted a full market investigation into TV ads, but Ofcom and the OFT rejected it
- In the "son of CRR", the OFT wants the definition of ITV1 to be changed to account for its impacts presence across various platforms
.jpg)
.jpg)