When ITV boss Charles Allen declared that he wanted an end to the complex Contract Rights Renewal (CRR) rules last week, few in the industry were surprised – although some have accused the chief executive of hypocrisy.
CRR, which has governed trading between the broadcaster and advertisers since last year, means clients get discounts if the broadcaster does not deliver agreed ITV1 ratings targets. And with the channel’s audience share down by nine per cent in the first half of the year, ITV stands to lose &£150m.
Some buyers say it is the channel’s own performance that is to blame, and that Allen should look to raise ITV’s game before attacking constraints put in place to safeguard advertisers. Zenith Optimedia television broadcast director Chris Hayward says: “This is one of the most hypocritical and outrageous things I’ve heard in some time.”
Allen agreed to the formula in exchange for being allowed to merge Granada with Carlton, but now says that multi-channel growth has resulted in “unintended consequences” with the system. He is preparing to lobby for the formula to be abolished or changed ahead of next year’s Ofcom review.
CRR sets out a number of rights that advertisers and media buyers have when buying airtime from ITV, including the right to renew their contracts on a rolling annual basis, adjusted for changes in the channel’s audiences, with no reduction in the discounts they receive.
Hayward questions Allen’s insistence that the market has changed significantly since the deal was put in place: “ITV has its problems. It has had a time of soul-searching and we are seeing a period when the BBC is competing strongly.”
He agrees that multi-channel has expanded quickly, but says that it was in existence and developing audience share at a “significant rate” to the detriment of ITV when the agreement was put in place.
Hayward adds: “The challenge is back with Allen. CRR is linked to audience performance. He is panicking and wants to remove it because the audience decline is probably greater than anticipated.”
Carat operations director Steve Hobbs says he would like the agreement to remain in place for at least two or three more years, or the premium ITV could command would continue to increase rather than naturally fall – as he believes it would under CRR. “The reality is that ITV1’s position in the market is falling, but overall it’s doing okay,” says Hobbs.
As another agency buyer points out, including the broadcaster’s digital channels, ITV has more than half the market. “It is still controlling a vast portion of the audience that many clients require,” says the source, putting his support squarely behind CRR. “From an agency and client point of view, if a channel is losing share, then why shouldn’t you be able to take your money out?”
The Incorporated Society of British Advertisers (ISBA) agrees, stating that there is no reason for CRR to be scrapped or changed, and that Carlton and Granada both accepted the agreement before the merger. A spokesman says: “This was to sit in place for a minimum of three years and there may well be a case for it to be continued beyond this.”
With ITV faring well overall, and ITV2 overtaking Sky One as the most popular multi-channel station in the first half of 2005, Allen’s argument appears to lack consistency. As one media buyer says: “He can’t have his cake and eat it.”