ISBA hits out at Lords call for CRR removal

The House of Lords has called for the removal of Contract Rights Renewal (CRR), which restricts how much ITV1 can charge advertisers.

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The House of Lords Communications Committee recommends that CRR should be replaced with “binding undertakings” from ITV to invest an appropriate proportion of any additional revenues from advertising into creating UK-originated programming and training.

ITV accepted CRR undertakings in 2003 to deal with advertisers’ concerns that the merger of Granada and Carlton could form ITV creating a monopolistic position.

CRR gives advertisers and media buyers the right to renew contracts with ITV with no extra price increases from 2003 levels and includes a system that links the amount advertisers spend to audience share.

The Competition Commission (CC), after a thorough and lengthy industry dialogue, ruled in July there will be no change to the CRR remedy imposed on ITV in 2003.

Culture secretary Jeremy Hunt has previously signalled he would seek to remove CRR and last month said he will “look again” at the regime.

The Lords’ recommendations also include a “short, focused review” of the trading system for television advertising in order for it to become more transparent.

Bob Wootton, director of media and advertising at advertiser body ISBA says advertisers are “disappointed and bemused” with today’s recommendations.

He says: “Investment in quality content is not a direct subsitute for CRR. As advertisers we want a strong ITV, but not in terms of its ability to clobber us. There is no connection.”

UKTV executive director of business of business and operations Julia Jordan says says that the company has always urged a rethink on TV trading practices but that abolishing CRR “in the short term” is not the right course of action as ITV is still “a phenomenally powerful market leader”.

She says: ” CRR should remain in place until such a time that the advertising market has evolved to better capture the full value of the today’s multi platform television medium and if we remove CRR now that removes the incentive for ITV to help lead that advertising revolution.”

An ITV spokesman says: “We welcome the committee’s conclusion that the Contract Rights Renewal rules on the sale of advertising are overly detrimental to ITV and should be abolished.”

The Committee, which began a review of TV trading issues in July , also recommends that all channels should reduce the maximum amount of advertisements shown per hour to seven minutes.

Currently ITV 1, Channel 4 and Channel 5 are permitted a maxium of eight minutes per hour at peak times, with smaller commercial channels allowed an maximum of 12. This could cause a rise in TV ad prices due to supply and demand..

ITV says: “We also welcome the recommendation that the number of advertising minutes per hour should be harmonised down to an average of seven minutes on all commercial channels.”

Wootton says a reduction to ad minutes would disproportionately affect smaller broadcasters and that with less time to fill with adverts on TV, the larger broadcasters will charge advertisers more.

He adds: “If you reduce the supply, if the price does rise, some advertisers and agencies will walk away completely – this could even deflect revenue from bigger broadcasters.

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