Friday, October 10, 2003

UK media merger British regulators have given the green light for a merger between media companies Granada PLC and Carlton Communications Group PLC. The new firm will become the largest commercial broadcast company in the UK, controlling over 50% of TV advertising. The two companies (combined value of $6.8 billion) already are joint owners of ITV, the number one British commercial TV station. As a condition for the merger, the two companies have to agree to hold current advertising prices steady.  The merger has won approval from U.K. regulators but is conditional on the companies adopting rules intended to keep ad rates stable, setting up an adjudicator to stabilize rates and sustaining rates for current buyers for the next few years. An adjudicator will be being appointed. Nevertheless, ad buyers are anxious that the terms are vague, and that they will eventually be squeezed. Granada has been in the TV business since 1954, but it recently stepped up its acquisitions. In 2000 it acquired the television interests of United News and Media. In 2001, it purchased Border TV, a regional company in the ITV network. The company is a leader in television production, exporting shows to 120 countries. It owns the following channels, all parts of the ITV network in the UK: Granada Television, East Anglia Television, Yorkshire Television, Tyne Tees Television, London Weekend Television, Meridian Broadcasting and Border Television. Granada's broadband division has stakes in pay TV channels and Internet ventures. The company also owns small stakes in several UK soccer clubs. Carlton is a much newer company, founded in 1983 and in TV only since 1993. It owns most of the other regional services of the ITV network, including London Weekday, Central England, Wales, and West Country. It also has production studios, and a publishing house and owns a handful of cable and satellite channels. In addition, the company owns a library of about 2,000 films. Carlton and Granada's joint venture in digital television, ITV Digital, turned out be a disaster, the unit going belly-up in 2002. As in America, broadcast TV in the UK is suffering from competition from cable and satellite. According to a September 1 article in the Guardian ("The BBC is under siege"), this is how it all breaks down: One, the share of the television market taken by [non-commercial] BBC1 and BBC2 combined has shrunk from 50% in 1988 to 37-38% now (the financial boost given to the BBC in recent years was done to slow this decline, not reverse it). Two, ITV has also been losing market share (down from 42% in 1988 to under 25% this year). Three, the gainers have been Channel 4 (in its early days), Channel 5, cable and, especially, satellite. These together now account for roughly the same share as the BBC. Already, according to a Wall Street Journal article, ("Agencies Are Wary of U.K. TV Deal", 10/9/03), this merger may make the new company an inviting acquisition target. The pending merger has prompted speculation that the newly combined company could be a takeover target, particularly for U.S. companies looking to expand overseas. Viacom Inc., for instance, which owns TV broadcaster CBS and cable networks in the U.S. and the U.K., has expressed interest in boosting its presence in the U.K. media sector. Other rumored suitors are Disney, Microsoft, and Berlusconi Group's Italian TV interests. Whatever the upshot, the remarkable thing is that only minor conditions were imposed on such a big media deal. It certainly opens the door for even more consolidation in the European and world TV industry. 5:45:19 PM

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