Promise of gold in Celtic hills lures cross-media prospectors

Is Scottish TV, purchaser of Caledonian, justified in trusting the benefits of cross-media ownership, and Celtic potential? By Nick Higham. Nick Higham is BBC TV’s media correspondent

If, like me, you’ve sometimes wondered just what the advantages of cross-media ownership really are, Gus Macdonald may well be your man. Last week, the chief executive of Scottish Television, set out to explain them.

Macdonald’s company last year bought one of Scotland’s national newspaper publishers, Caledonian, publisher of The Herald and the Evening Times in Glasgow. It was the first such cross-media deal to be attempted under the terms of the 1996 Broadcasting Act, and the first to be subjected to the Independent Television Commission’s “public interest test” laid down by the Act.

The deal passed the test with flying colours. The good folk of Scotland, far from being appalled at the concentration of editorial and commercial power in the hands of a single company, welcomed the move because it established a stronger Scottish media group.

That, in turn, meant keeping one of the country’s two main broadsheet papers out of the hands of “foreign” owners (The Scotsman in Edinburgh is now owned by the secretive Barclay Brothers, who spend most of their time in Monaco or in their specially built castle on a remote Channel Island).

But what were the advantages for Scottish of buying Caledonian? There appear to have been two, judging from a speech by Macdonald at the Financial Times New Media and Broadcasting Conference.

One advantage was that it helped keep Scottish independent of the Big Three of ITV – Granada, Carlton and United – who might otherwise have gobbled it up, and retaining an independent Scottish television company is, of course, important for Scots’ pride.

The other reason, according to Macdonald, was that it made commercial sense. The bulk of STV’s ad revenue (88 per cent) comes from national advertising; only 12 per cent comes from Scotland. For Caledonian, the proportions are reversed: 90 per cent Scottish to ten per cent national.

From this point of view, Macdonald says, the two companies are a good fit. What’s more, they are now represented in everything from specialist magazines (including a home interest title, and other titles which Scottish intends to spin off from successful television shows) through local newspapers and quasi-national press, to the most attractive advertising medium of the lot, peaktime ITV.

The policy will be to encourage advertisers to move up from taking space in specialist consumer magazines through the newspapers to television – ultimately, perhaps, to peaktime television.

Scottish is also toying with the new media. It has a subsidiary which produces an electronic version of the Herald for the Internet, and another producing an online service for local cable.

Digital terrestrial television will offer a chance to broadcast two, possibly even three, new channels throughout central Scotland. How will the programmes for such channels be paid for? By sponsorship of course. Macdonald says: “Every marketing budget in Scotland becomes a potential programme budget for us.”

Citing the fact that 17 per cent of the UK population lives on the Celtic fringes, while only one per cent of programmes shown by the national networks are made in Scotland, Wales or Northern Ireland, Macdonald says the company has definite ambitions to produce Scottish programming for satellite distribution throughout the UK, along the lines of its existing Sky Scottish service.

The new media, he says, give the company “a historic opportunity to break the fetters which limit Scottish Television to broadcasting to central Scotland”. The combined group has a substantial archive of Scottish material – 20,000 hours of television, a 100-year-old photo library and 200 years of text – to exploit.

Macdonald’s is one of the most complete commercial rationales for cross-media ownership I’ve yet heard. Even so, if it weren’t for the specifically Scottish dimension, it still wouldn’t be entirely convincing.

In particular, the idea of persuading advertisers up through a “ladder” of media-buying opportunities culminating in peaktime ITV – although neat – is as yet an unproven one. How many advertisers, particularly in a sub-national region like Scotland, have the resources, the brands or the marketing vision to seize on the idea with enthusiasm?

Nonetheless, the Scottish-Caledonian merger, and the arguments in favour of it put forward by Macdonald, are a useful reminder that we shouldn’t underestimate the significance of what the BBC refers to as the “national regions”.

Stewart Purvis, chief executive of ITN, offered more evidence of this in his speech to the FT Conference.

ITN is a partner with the Welsh fourth channel, S4C, in an unopposed bid for one of the six digital terrestrial television multiplexes, or bundles of channels.

People at ITN, according to Purvis, wondered why he was spending quite so much time with such an obscure enterprise as S4C.

“Look, I told them. These are people who’ve got themselves a deal in which they get an annual government grant, it’s index-linked, they can also run ads, they regulate themselves and they can do anything commercial on top they wish.”

There is, potentially, gold in them thar Celtic hills.

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