When faced with a competitor, ITV doesn’t so much form the wagons into a circle as split up, head for the hills and make it every man for himself.
In that spirit, the MAI-owned sales house TSMS reacted with some glee at the release of Goldman Sachs’ forecast of the likely effect of Channel 5 on ITV last week.
The Goldman Sachs’ report says that Granada and Carlton will be hit harder by the new broadcaster than MAI because the channels MAI owns will not be as well covered by Channel 5 as its competitors.
Goldman Sachs analyst Neil Blackley forecasts that Channel 5 penetration in the Carlton and LWT regions will be 88.1 per cent and 70 to 80 per cent plus in the Granada and Central regions. This compares with a penetration of only 11.8 per cent in Meridian and 30.1 per cent in Anglia.
As it was a consultant on Channel 5 Broadcasting’s bid, TSMS has already been selling to agencies on the basis that it will require a greater share of their clients’ money from 1997 onwards to up-weight regions poorly covered by Channel 5.
This has led to Carlton writing to TSMS to complain that it is talking up the future competition.
“Carlton would do the same thing,” says Tim Wootton, chairman of TSMS. “But we’re the ones with some good news and we’re going to talk about it.”
The effect of Channel 5’s different penetrations will, according to Goldman Sachs, cost Carlton and Granada 16.1m and 11.9m in lost profits in 1997. In the same period MAI, with 29 per cent of Channel 5, will see profits rise by 1.8m in the same period.
However, Carlton argues that the Goldman Sachs report has a flawed view of how airtime is bought. “It is suggesting agencies will book Channel 5 and then top up the ITV regions it hasn’t got covered,” says Chris Soden, account director at Carlton. “But Channel 5’s revenue is much more likely to come off total ITV share as Channel 4’s does now.”
And not all agency buyers are convinced that Channel 5’s metropolitan strength will definitely benefit TSMS’s channels.
Of potential concern for TSMS is Channel 5’s stated intention to make its first regional opt-out Scotland. STV already suffers audience loss because Channel 4 and satellite are more popular with the Scots than the English.
A number of other possibilities are also being considered by buyers.
“Channel 5 is going to be the fourth competitor in London,” says Simon Cox, broadcast director of CIA Medianetwork. “That could hit Carlton and LWT, but it could just as easily lower the capital cost of advertising in London, something lots of advertisers want but can’t afford to do, and drag new money into the City and away from TSMS’s channels.”
Tim Wootton is not convinced: “The history of all commercial TV in this country is that when the price comes down advertisers just reduce their budgets.”
Advertisers are likely to be split. There will be those concerned only about where airtime is cheapest and those willing to pay a premium for quick, high coverage on ITV. To keep those latter advertisers on board, ITV may find it is time to form the wagons into a circle.