Sunday, June 22, 2008

Power of European Broadcasters & CRR in UK

The television advertising market in Europe is heavily concentrated at the top, with market leaders in the UK, France, Italy and Spain enjoying significant market share. As per Nielsen data at end of December 2007, market leader ITV had a 42% share of the UK TV advertising market. In France, market leader TF1 garnered a 61% share of TV ad market. In Italy, Mediaset enjoyed a 64% share of the TV ad market; while in Spain, Telecinco commanded a 31% share of TV market.

Despite a seemingly monopolistic structure, however, it is interesting to note that ITV in UK is the only player in Europe that is subject to price regulation by the UK Competition Commission through a mechanism called the Contracts Rights Renewal (CRR).

ITV plc was formed post the merger of Carlton and Granada in 2003. Recognising the concerns of the advertising community about the extent of market power ITV plc could have post merger, the Competition Commission put in place the CRR remedy, overseen by an independent Adjudicator (currently Robert Ditcham).

CRR is intended to protect the advertising market: a) by guaranteeing that advertisers and media buyers are no worse off following the merger of Carlton and Granada; and b) by putting in place an automatic ‘ratchet’ which reduces the amount advertisers have to commit if ITV’s audience shrinks. The CRR sets out a number of rights that advertisers and media buyers have when buying advertising time from Carlton/Granada, and in particular, gives advertisers and media buyers the right to renew their contracts on a rolling annual basis, adjusted for changes in ITV’s audiences, with no reduction in the discounts they receive. Until the remedy is no longer necessary, the share of revenue committed by advertisers/media buyers on television advertising to Carlton/Granda need not increase above 2003 levels.

The Office of Fair Trading (OFT) is responsible for the CRR remedy, supported by Ofcom. Ofcom proposed a review of the TV ad market in its 2005/06 annual plan, but after undertaking preliminary analysis concluded that the case supporting the need for a full review of the entire market had not been made. Ofcom has not communicated any plans to conduct a review of this market.

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