All you ever wanted to know about The broadcasting act

The Broadcasting Act finally comes into effect next month. Claire Beale

assesses its impact on the TV, radio and publishing sectors and reports

on the media players that are already geared up for the new world of

digital TV and cross-media sales

What is the Broadcasting Act?

The Broadcasting Act 1996 is a 194-page document that sets out a new

framework for the media industry to take it into the next millennium.

Who created it?

The act has been drawn up by the Department of National Heritage, and

has been shaped by extensive industry consultation and a lengthy passage

through Parliament.

Why did they bother?

According to the National Heritage Secretary, Virginia Bottomley, the

act is designed to give media organisations the chance to expand,

develop new services and exploit new opportunities, transforming the

broadcasting and communications landscape.

‘We must now move forward to a dynamic, deregulated, flexible and

innovative media industry,’ declares Bottomley, and the act ‘will allow

us to be a major player in the emerging world market.’

When does it come into effect?

The act received Royal Assent at the end of July. Most of the digital

broadcasting provisions come into effect on 1 October and the media

ownership provisions come into force on 1 November.

Why should I care?

The act could potentially have enormous implications for the entire

structure of the media industry.

So what are the main points?

There are two main planks to the act - new rules on cross-media

ownership and legislation governing the introduction of digital

television.

What is cross-media ownership?

In the past companies have been prevented from having too much power in

the media industry by being restricted on the share of a particular

medium they can control and the influence they can have in other media.

The new cross-media ownership rules allow greater concentration of

ownership in individual media and enable companies to expand into other

media.

What will be the effects of the new cross-media rules?

Brace yourselves for fevered takeover and merger activity among

television, press and radio companies. Many players - big and small -

will be swallowed up in the race for synergies across different media,

concentrating power and investment into the hands of fewer, larger

operations.

So it’s all about media concentration, then?

Not exactly. The digital broadcasting provisions will herald an

expansion of media opportunities - a host of new channels catering to

niche and not-so-niche audiences.

What does the act say about ITV licences?

TV companies used to be restricted to owning two ITV licences. The act

will allow a single company to own any number of ITV stations up to a

limit of 15 per cent of the total television audience.

What will this mean for ITV’s structure?

This is the green light that the big players have been waiting for -

they can capitalise on their original ITV investment by taking a greater

share of the network through snapping up smaller companies.

Who are the major ITV players at the moment?

ITV is already roughly carved up among three big operators - United News

and Media, Carlton Communications and Granada Group, and these three are

expected to consolidate their interests through the acquisition of

smaller ITV stations.

What are they likely to buy?

Michael Green’s Carlton Communications controls Carlton and Central

Television and has been eyeing up HTV and Westcountry Television.

Gerry Robinson’s Granada - owner of Granada Television and LWT - has a

19.99 per cent stake in Yorkshire Tyne Tees and a further 3.8 per cent

in a deadlocked company, and could attempt a full takeover.

Lord Hollick’s United already owns Meridian and Anglia Television but

could take on YTT, HTV or STV without breaking the 15 per cent ceiling.

What are the opportunities for national newspapers and TV companies to

merge?

National newspapers with less than 20 per cent of national circulation

will be able to own any ITV or other broadcast licence up to 15 per cent

of the total TV audience, and a TV company can control up to 20 per cent

of the newspaper market. Newspapers with more than 20 per cent will be

able to own broadcasting licences outside of ITV, Channel 5 or analogue

radio as long as they do not exceed the 15 per cent market limit.

Wasn’t there a tussle over the provisions for newspapers?

One of the most contentious provisions of the act is the rule preventing

national newspaper groups with over 20 per cent of national circulation

from owning more than a 20 per cent stake in a Channel 3 (ITV), Channel

5 licence or radio licence.

The Labour Party argued throughout the preparation of the act that the

20 per cent limit should be abolished and has now indicated that it will

revisit the issue should it come to power at the next general election.

Crucially, this provision means that neither News International nor

Mirror Group will be able to expand into ITV territory.

Which press/TV alliances are likely?

Lord Hollick has already taken advantage of this provision by merging

his MAI television interests (Meridian and Anglia) with United

Newspapers (publisher of the Daily Express, Sunday Express and the Daily

Star) to create United News and Media.

What are the prospects for local newspaper groups?

A similar rule applies. A local newspaper with more than 20 per cent of

newspaper circulation in its area will be able to control a national

broadcast licence but not a regional Channel 3 licence in the same area.

Local newspapers with less than 50 per cent of local circulation will

also be allowed to control one AM and one FM radio licence in their

area.

Local newspapers with more than 50 per cent of their market will be

allowed to control one local radio licence provided there is at least

one other commercial local radio licence serving the same area.

What about radio companies?

Like television, the numerical limits on local radio licences controlled

by a single company have been abolished and replaced by a ceiling of 15

per cent of the total radio market.

Is there much room for growth in the radio market?

Most of the big radio groups have very little room for expansion in

their own medium. Emap already has just under 15 per cent of the total

radio market, while GWR has around 12 per cent.

In any given area, a single radio company can hold up to three local

radio licences, as long as one of them is an AM licence and one an FM.

What about cross-media ownership between national TV and radio, then?

The old rules governing joint ownership of TV and radio stations remain

largely the same under the new act. The main change is the provision

allowing a regional Channel 3 licence holder to own one national radio

licence.

Can regional TV and radio get together?

Regional ITV companies will not be allowed to control radio licences in

their area, and vice versa.

What does cross-media ownership mean for media sales?

It will mean the introduction of advertising opportunities that work

from one medium to another. This will see the birth of the cross-media

sales house.

Are any of the big companies preparing themselves for cross-media sales?

Express Newspapers and its sister TV sales house, TSMS, are already

looking at offering cross-media sales packages - an initiative steered

by TSMS’s chief executive, Tim Wootton.

Similarly, Channel 5’s sales director, Nick Milligan, is talking to

media buyers about advertising opportunities combining Channel 5 with

affiliated companies including the newspaper publishing division of

United News and Media and CLT, the radio company which owns Atlantic 252

and Talk Radio.

Carlton UK Sales now includes cable sales and cinema sales in addition

to its ITV sales interests.

What does cross-media ownership mean for media buying?

David Cuff, broadcast director of Initiative Media, says cross-media

ownership will result in fewer negotiations, and deals being done at a

higher level. ‘Where companies can develop sales strategies across their

media holdings they will become very powerful, and will be able to talk

to advertisers at a very senior level. They will develop more far-

reaching relationships with their advertiser clients,’ Cuff explains.

Will media companies need to adapt?

Bigger conglomerates selling across media will be even more powerful

around the negotiating table, so buying muscle will remain an important

requisite for a media company.

What does the act say about Channel 4?

Channel 4 has been battling for several years to end the formula whereby

any excess ad revenue it makes is handed over to ITV or put into

statutory reserve.

The act ends payment into the statutory reserve and will phase out the

payments to ITV from 1998. The phasing out of the funding formula should

mean more money for Channel 4 programmes, making it better able to

compete in the TV arena of the future.

What provisions are being made for the BBC’s commercial activities?

Any commercial services launched by the BBC will be licensed and

regulated by the Independent Television Commission under the provisions

set out in the act. This brings the BBC’s advertising or subscription-

funded services into line with the UK’s other commercial television

channels.

What is digital broadcasting?

Digital broadcasting is a method of compressing the TV signal to allow

more signals on to a broadcast frequency than is possible using analogue

technology.

Why is digital part of the act?

Digital broadcasting will revolutionise the media framework by

introducing a vast array of new television and radio channels to UK

consumers. These new channels will have to be allocated and policed and

the act makes provisions to ensure their smooth introduction.

Will terrestrial channels be invited to the digital party?

The terrestrial TV channels will each be allocated a digital TV licence

for broadcasting their existing channels.

How will the other digital licences be allocated?

The 12-year TV and radio licences will be awarded by the ITC and the

Radio Authority on the basis of which applicants are likely to do most

to promote the development of digital broadcasting.

Will cash bids be involved in digital allocation?

The licences will be free for the first licence period to encourage

investment in digital broadcasting. After the first licence period all

digital service providers will have to pay a percentage of their revenue

to the Exchequer.

What does digital broadcasting mean for advertisers?

Crucially, digital broadcasting will mean more outlets for advertisers

to promote their products. These outlets will, in many cases, be more

tightly targeted than terrestrial channels, which means less wastage.

The digital revolution could also result in more opportunities for

advertisers to move into programme supply as the proliferation of

channels leads to a surge in demand for editorial material.

How will digital broadcasting affect media buying?

The rapid growth of advertising outlets will require greater

understanding of a client’s target market and more research of media

consumption, often working off very low levels. Planning skills will

come to the fore more than ever before.

Who will ensure that programme and editorial standards are maintained

throughout this period of change?

As well as the Radio Authority and the ITC - which will monitor licence

holders to ensure they fulfil the terms of their contracts - the act

establishes a new body to ensure certain standards are maintained. This

new watchdog will be formed from the merger of the Broadcasting

Standards Council and the Broadcasting Complaints Commission. The merger

will create a single forum for public concerns about taste and decency

and will monitor violence and sexual content in TV and radio programmes.

What about ensuring ‘national’ events are available to everyone?

There has been much concern that the new era of media choice could lead

to a bidding war for major sporting and national events, which could

result in them moving on to subscription channels and away from general

access.

The act guarantees the availability of live coverage of certain listed

events such as Wimbledon to free-to-air TV channels like the BBC and

ITV.

This article was first published on Campaign