Here’s a potentially huge story:
ITV are about to announce really bad results. Channel 4 is struggling. Five is more or less where it was 10 years ago, with a tiny audience share, but the average person only watches Five for an hour and 20 minutes per week (in other words, they watch CSI Beardy and then 20 minutes of CSI Miami). A few years ago, the average cost of reaching 1000 adults with a TV ad was £7; it’s now £4.50. Clearly, something has to give.
You may remember from our Politics and Economics discussions (isn’t Media a broad subject?), that (according to Marx) Capitalism relies on a certain level of unemployment in the economy to keep wages low. If the economy is too strong for too long, wage demands from workers get too high, which causes inflation, which is good for people who borrow money, but bad for people who lend it. So it helps for the economy to occasionally go into recession, to drive unemployment up and drive wages down. It also allows capitalists to do their favourite, favourite thing of all, which is to merge and acquire their rivals, thus reducing the level of competition, which in turn allows them to make more profit whilst paying lower wages and offering a poorer service to the poor saps they call customers.
Look what happened in the banking industry. In the last 10 years or so, we’ve seen several banks merge into one. First, Halifax merged with Bank of Scotland to form HBOS. Then HBOS was taken over by Lloyds. Meanwhile, The Royal Bank of Scotland has acquired NatWest and Coutts as well as Ulster Bank. The Spanish banking group Santander has acquired Abbey, the Alliance and Leicester (which itself was formed after a merger), Bradford and Bingley, and GE Capital. Thirteen banks have become three.
What happens to competition and consumer choice? So much for the banking industry. The British TV industry is one of the most creative and powerful in the world, but a lot of recent successes have come from small independents like Freemantle, Celador, and so on. The BBC has the luxury of the licence fee as well as a commercial division, BBC Worldwide. When they had audiences of up to 20 million, ITV were able to compete with the BBC, and outdo them most of the time. But they don’t like the multi-channel era, and they’re struggling to respond to the pull of new media. This radical merger would be a huge blow to the idea of competition in the UK market.
Probably the main reason for going ahead with it would be to upset Rupert Murdoch:
However, the new broadcaster would control well over 60% of the British TV advertising market, and the government would have to set aside competition law for the merger to take place. It would also infuriate commercial rivals, most notably BSkyB, in which Rupert Murdoch’s News Corporation is the largest shareholder, which would face a powerful new competitor.