Fool's Eye View

[ July 28, 2000 ]

Gripping Granada grabs ITV

By Christopher Spink (TMFEagle)

Great Titchfield Street, London -- Granada Media's (LSE: GME) purchase of United News & Media's (LSE: UNWS) commercial television franchises for £1.75b is not the end of the reorganisation of the ITV network; it is not even the beginning of the end; but it may be the end of the beginning. The year 2000 will be remembered as the year commercial broadcasting started to grow up in this country.

Granada's big cheese Gerry Robinson in many ways resembles Churchill. He hankers after the big deal. Details matter little to him. Above all he enjoys his work, just like the wartime PM. This purchase may mean his desire is now satiated and he can depart the big stage. His right hand man Charles Allen will now take control of the reins at the enlarged company. The time of big egos has passed.

Granada's land-grab

What a finale though! Last November, the game looked up for Gerry. It seemed his arch-rival Michael Green at Carlton (LSE: CCM) had gazumped him by agreeing a deal with Lord Hollick of United before the Government had relaxed the rules on ITV ownership. Granada responded by making offers for one or other company, forcing the Government to act.

Gerry's genius came in spinning off Granada's media interests just a fortnight ago. This float raised £1.5b, paying off debts and giving the group a free hand in the final act of this ITV drama. This commanding position, with Granada stripped of its catering and hospitality interests, has allowed the group to snap up United's three ITV franchises, Meridian, Anglia and HTV, by issuing £1.25b of new shares and paying £500m in cash. Even after this Granada will retain a majority 70% stake in the new company.

ITV future?

If approved, Granada will now be at the forefront of reorganising the ITV network. The new company will have to defend its dominant position over satellite, cable and digital broadcasters, subscription channels and new media transmitters. BSkyB (LSE: BSY) leads the way at the moment. Foreign predators will also be on the prowl, waiting to snap up the jilted Carlton (LSE: CCM), which owns most of the remainder of ITV left behind by Granada and United.

In addition European broadcaster RTL (LSE: RTL), formed by the merger of Pearson's (LSE: PSON) television interests with the TV company owned by continental media giants Bertelsmann and Audiofina, will also have a part to play in ITV's future. The group floated yesterday. RTL said it was interested in increasing its stake in the UK's Channel 5, by picking up the stake United will have to sell to satisfy the Granada merger terms.

The group might go one step further and pick up Carlton as well, as long as it doesn't step over the Competition Commission's new rule that no UK broadcaster may have more than 15% of the TV audience at anyone time. The one problem hanging over this new ITV company is this regulatory millstone. The broadcasters of the future will have to be global in their outlook to survive.

At the moment the ITV network commands 60% of advertising revenue in this country. That can only decline, if audiences are not allowed to increase. The only growth that can come will be from overseas, or else by branching into new areas, such as digital and Internet realms. For example the valuable itv.co.uk website looks likely to be a prime project. Welcome to the grown-up TV world.

Where Next?

Have your say on the Fool's Eye View discussion board, via the resources section below.
July Fool's Eye Views on the ITV drama: Growth, not profits at BSkyB; Carlton / United Merger off; The Battle for ITV; Gazing up at Granada.
Sector Dissector - Media Manoeuvres.
Or go to the Granada Mesage Board.
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