Select Committee on Culture, Media and Sport Minutes of Evidence


Memorandum submitted by Granada plc

INTRODUCTION

  1.  Granada plc is the UK's leading commercial television broadcaster and producer, and has a growing presence in international and new media markets.

  2.  Granada hold six regional ITV licences: Granada Television in the North West, LWT in London, Yorkshire Television, Tyne Tees Television in the North East, Anglia Television in the East of England and Meridian Broadcasting in the South East. Together these licences provide well over 3,000 hours of regional programming each year. Granada also has interests in Border Television; SMG, which holds the Scottish and Grampian ITV regional licences; the ITV breakfast provider, GMTV; and ITN, which provides news for ITV and Channels 4 and 5.

  3.  Granada produces much of ITV's most successful programming. Programmes such as Coronation Street, Tonight with Trevor McDonald, A Touch of Frost, Dimbleby, Blind Date, Cold Feet. Stars in Their Eyes, Survival, Where the Heart Is, Emmerdale and Hornblower are produced in Granada's regional production centres up and down the country. In addition, Granada production companies produce some of the most successful programmes on other UK channels, including The Royle Family, What the Papers Say and University Challenge for the BBC, Longitude, Spaced and Countdown for Channel 4 and an increasing volume of programming for Channel 5 and other channels, including Granada's own pay-TV channels.

  4.  Together with Carlton, Granada owns ONdigital, the commercial digital terrestrial television platform. In little over two years, ONdigital has reached over one million households and rolled out services including e-mail, Internet access and pay-per-view movies. Granada also has interests in a number of pay-TV and free-to-air channels and is developing multi-media, digital television and broadband services in education, health and other areas. Granada's broadband and online partners include: Boots, Ask Jeeves, Arsenal FC and Liverpool FC.

  5.  Internationally, Granada has taken stakes in commercial broadcasters in Australia and Ireland and has launched production companies in the US, Germany, Australia and China. Programmes from Granada's massive programming archive are distributed to broadcasters worldwide.

RESPONSE TO THE WHITE PAPER

  6.  Granada endorses the points made in the ITV Network submission to the Committee. Granada supports the Government's aim to create a more flexible, fair and clear regulatory framework for broadcasters. Granada agrees that support for original UK production and regional broadcasting should be at the heart of ITV's public service role. Together with the other ITV companies, Granada is committed to making the three tier framework for content regulation work.

  7.  Granada welcomes the establishment of an Office of Communications (OFCOM) covering telecommunications, television and radio. The new regulator has the tools to ensure effective regulation of communications across the board. As competition continues to increase, OFCOM must ensure that sector specific regulation reduces proportionately.

  8.  The failure to bring the BBC under a common regulatory framework as the rest of the industry is the big missed opportunity of the White Paper and seriously undermines the Government claim to create a level regulatory playing field. The delicate balance of the public service broadcasting ecology will continue to be upset if the UK's largest player continues to sit outside the regulatory framework for the rest of the industry. External regulation of the BBC has the near unanimous support of the commercial industry, consumer and viewers groups and the regulators. It would post no threat to the editorial or political independence of the Corporation, but do much to demonstrate that modernised and fair regulation is more than a promise. Granada hopes that this issue will be reconsidered.

  9.  The following paragraphs deal with those parts of the White Paper where the ITV Network submission does not take a view or interests of Granada are more directly affected.

INDEPENDENT PRODUCTION

  10.  Granada accepts that independent production obligations have helped maintain the diversity of British television and supported the development of the UK production industry. The obligations had originally been intended as a temporary market intervention to stimulate a then infant industry. Granada believes the independent quota needs to reflect the changed production market of the twenty first century. The public policy priority should be securing the best on-screen programming and supporting production as a creative industry—not promoting one form of organisation of production company over another.

  11.  The current definition of "independence" for production companies creates a number of anomalies. Small producers with links to broadcasters outside the UK may cease to be classed as "independent" in the UK. Large producers with genuine market power in the production market, but no direct links to broadcasters, may remain "independent". Producer-broadcasters, such as Granada, seeking to compete for commissions from broadcasters with whom they have no links are currently not deemed to be "independent".

  12.  The current rules are having a doubly punitive impact on Granada. ITV network commissioning is strictly regulated by the OFT and the ITC. As the Competition Commission recently concluded, there is a level playing field for ITV commissions and the market is "competitive"[5]. In addition, "independent" producers benefit from the 25 per cent quota for ITV, which have led to the largest independents producing more for ITV than some ITV companies. ITV's quota is made even more onerous by the loss of independent status for larger external producers, whose ITV productions now fall outside the quota. Endemol and Pearson, for example, have been involved in recent deals, which mean their productions do not count towards ITV's quota.

  13.  But if ITV producers—squeezed by external producers for ITV commissions—look elsewhere for commissions, they are hampered by the fact that any programmes they produce will not count towards other broadcasters' own independent quotas. The BBC, in particular, has had difficulties in meeting its quota and therefore has a strong incentive to steer external commissions away from Granada, despite Granada's strong production track record. Producer-broadcasters competing for commissions from broadcasters with whom they have no links do not represent a problem, but provide evidence of a healthy production market. In such cases, the current, narrowly defined quota is reducing competition in the production market, rather than promoting it. Granada's production success—creatively and economically—and its development into one of the UK's leading television producers for all channels is occurring in spite of, rather than because of regulations.

  14.  The bias against ITV producers also has an unfortunate regional dimension. The independent production sector is skewed to the South East and to London in particular. Investment and employment in the ITV production companies are spread more evenly across the UK's nations and regions. The current independent quota therefore favours a relatively metropolitan segment of the UK production industry over more regionally representative ITV producers.

  15.  While welcoming the additional leeway to broadcasters on the timing of independent commissions envisaged in the White Paper, Granada believes that the revision of the independent production quota needs to go further. Granada has proposed that production companies be classed as "independent producers" for commissions for broadcasters with whom they have no ownership links. This would help reduce the regional bias and resolve the major current anomalies in the system:

    —  producers with links to broadcasters in the UK or abroad would no longer lose independent status when producing for channels in whom they have no ownership stake (eg Pearson for ITV); and

    —  producer-broadcasters would no longer be penalised in competing for commissions from channels in whom they have no ownership interest (eg Granada for the BBC).

TELEVISION OWNERSHIP

  16.  Granada welcomes the White Paper's proposals on relaxing ITV ownership restrictions and its determination to ensure that no "additional barriers" are placed in the way of ITV companies.

  17.  The London licence rule is unnecessary, given that any competition issues can be addressed via the competition authorities. Granada also supports the removal of the 15 per cent audience share limit, which has proved an increasingly blunt instrument in protecting plurality. As the Government states, further ITV consolidation will have a number of potential benefits, in terms of ITV's performance and ITV companies' ability to build an international presence. Any proposed ITV mergers will naturally be subject to the merger provisions of the Fair Trading Act, safeguarding the interests of consumers and advertisers.

  18.  Granada does not believe that full ownership of GMTV by the ITV companies would pose any threat to plurality or diversity, or to advertising competition. Likewise, Granada supports the White Paper's pledge to consider relaxation of the ownership limits on ITV nominated news providers. Granada agrees with the view expressed by the Independent Television Commission, that it is:

    "not . . . necessary to retain the current statutory rules for the appointment of nominated news providers, or the statutory fragmentation of the ownership of nominated news providers."[6]

  19.  The Government indicates in the White Paper that a "new system for ensuring plurality in television services" will be introduced. The lesson of the 1996 Broadcasting Act is that any such limit should be confined to secondary legislation and open to amendment by the Secretary of State (on the advice of the regulator) without recourse to primary legislation. The media and broadcasting sectors are developing too rapidly for Parliament to be confident that any yardstick of plurality—however straightforward and simple when introduced—does not become outdated or even counterproductive well before the next round of major communications legislation is due.

REFORM OF CROSS-MEDIA OWNERSHIP RULES

  20.  Granada welcomes the Government's commitment to further consultation of the complex issue of cross-media ownership. Given that the Government considers that a system to protect plurality will continue to be required within sectors such as television, some form of cross-media restriction may also be necessary.

  21.  The White Paper refers to "share of voice" models for gauging and limiting cross-media holdings. Any such cross-media formula is likely to prove unsatisfactory in practice as different media are not equivalent in "share of voice" terms. In particular, the independent broadcast media—television and radio—face thoroughgoing, external content regulation. For television and radio, regulation protects the impartiality and balance of news services, for example. The same is not true of the newspaper sector, where there is a strong tradition of partiality and even political partisanship, and no external regulator seeking to impose minimum content standards.

  22.  For these reasons, the common ownership of television and radio companies may be less of a concern from the plurality perspective than cross-media holdings between newspapers and television or between newspapers and radio. Significant relaxation of cross-media ownership restrictions between television and radio is unlikely to lead to an unacceptable accumulation of media interest across the two sectors or any dilution of media plurality. Because of the additional tier of content regulation, impartiality and balance would be preserved as they are now in each sector. The same may not be true of cross-media consolidation involving newspapers and the broadcast media, where two very different cultures of impartiality and partisanship collide.

February 2001




5   Carlton Communications Plc and Granada Group plc and United News and Media plc, Competition Commission, para 2.74. Back

6   Communications Reform White Paper Response, ITC, page 17. Back


 
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Prepared 23 February 2001