Television trading - Deal or no deal: the fight for TV trade

There is a view that contract rights renewal has tamed one beast, ITV, only to unleash another, Channel 4. Last winter, the latter demanded 50% of the money coming out of ITV1 and ended up with £70m worth of extra business, illustrating the strength of its negotiating stance.

But on the back of a poor second-half ratings performance and a flattening audience profile for shows such as Deal or No Deal, it started annual hostilities this year by announcing a 5% hike in prices, to tackle an overtrading situation estimated at £30m.

In advance of this year's negotiations, it is not surprising that traders are trying to talk up their bargaining hand, but many on the buying side are saying that C4 will not have such an easy ride this time around.

Jim McDonald, head of broadcast director at Media Planning Group, warns: "I doubt Matt Shreeve [C4 head of agency sales] will be able to do what he did last year, which was go in and bang his fist on the table and say I want 50% of CRR."

C4 declined to comment on reports that it has deals running through next year with at least one agency group, which would make it even harder for it to push through price increases. But if even C4 has had its wings clipped, what chance have the rest got?

Whereas 2005 ended with TV revenues up 2.6%, latest estimates have them down between 5 and 7% this year, with ITV1 twice that.

Under CRR, up to £150m could come out of ITV1, and with the prospect that this safeguard may disappear, if not in 2008, then 2009, it appears likely that most agencies will take out of ITV1 all they can.

Online gains

With Group M estimating that £170m will go into online next year, including some FMCG money, broadcasters' fears that continued deflation of the TV market will harm the medium do not appear to be cutting ice with investment directors.

"The buyers are making hay," says one agency investment boss. "There are a few broadcasters at the moment who are being well and truly kicked around the negotiation room. The trading this year is ferocious and the smaller the sales house, the weaker their negotiating position."

ITV Sales remains on a hiding to nothing under CRR and is trying to convince agencies that its 2007 line-up is stronger, while hoping its successful digital channels can win back a sizeable chunk of CRR.

Insiders say ITV is desperate to put the prices up on its digital channels, while the broadcaster is also fighting what some fear could be a losing battle to stop advertisers targeting the 16 to 34-year-old demographic from abandoning ITV1.

"There's a real danger that this could be a tipping point for ITV1," says Chris Locke, group trading director at Starcom. "It's not just CRR. The big danger is that music and fashion brands may stop advertising on ITV1 for good. The natural home for ITV1's money is C4, but it has set out with a strategy of putting its prices up and that's a difficult conversation for it to have."

One of the big trends this year could be for buyers to hold back a significant chuck of advertisers' budgets and wait to see how the market develops, with no obvious strong performer.

Ilker Shakir, investment director for Unilever at MindShare, adds: "I don't expect all the money coming out of ITV1 to be committed back to the market. It's turning into a buyers' market."

Strong performers

So who will the winners be, if any? Apart from C4, Sky Media has been another strong performer in recent deal seasons, but it is struggling to convince agencies that they should pay higher rates to boost its third-party revenues.

IDS, like C4, has suffered a well-documented overtrading problem this year, falling out with none other than Procter & Gamble, the UK's biggest TV advertiser, and is in nothing like C4's strong position.

Five has been saved from disaster this year by the launch of its digital channels, which improves its strength in the increasingly vital free-to-air arena and provides the crucial family of channels without which, Locke says, Five would have been "dead man walking".

One thing that traders on both sides of the fence agree on is that this winter will see a return to old-fashioned deal making, a prospect that has the most canny among them rubbing their hands with glee.

This article was first published on Media Week