CITY AND SUBURBAN
How television's quango makes its charges worth more dead than alive
CH RISTOPHER FILDES
The affairs of Granada make required reading for anyone interested to know whether our 30-year-old system of televi- sion franchises is coming apart at the seams. Professor Alan Peacock, to whom the Government has referred that ques- tion, can enjoy watching the answers piling up in front of him. The story begins last year, with Granada discussing a merger with Ladbroke, Cyril Stein's bookmaking company, which had widened its interests and wanted to widen them further. That deal broke down, and Mr Stein has now gone into the Do-It-Yourself business in- stead — but news of the talks had got out. Rank Organisation, which had been look- ing at Granada for the last two years, saw its opportunity and made a bid of its own. That bid floundered, on striking a sub- merged provision in Granada's articles of association. This provided that nobody may vote more than five per cent of Granada's shares without the specific approval of the Independent Broadcasting Authority, the governing quango of com- mercial television. The IBA has refused its approval, and has equally refused to talk to Rank. It appears to have dug in along the line it took with Thames Television, which was that so long as a television contracting company is not actually going bust, it must stay with the owner who gained the franch- ise. The irony is that most of Granada's profits — certainly 80 per cent, arguably more than 90 per cent — come from its other businesses, like bingo clubs, televi- sion rental or motorway service, and these are what Rank sees in Granada. Rank would happily take on Granada TV, and as happily fall in with some other plan, for a spin-off or a buy-out, which would suit the IBA better. For the moment Rank's sensi- ble course would be to go on dialling 584 7011 in the hope that the IBA will start answering its telephone, but if it leaves the same old message on its Ansafone, Rank's next stop would be with Granada's share- holders. The odd clause in the articles only got there in 1984, when Granada gave up the two-tier share structure which kept the Bernstein family's control. There is no- thing to stop the shareholders voting the clause out again, and if it is all that stands between them and a remunerative bid, it will go. It would make the IBA look silly, but that could be instructive. The fact is that, entrenched along the Thames Line, the IBA can be outflanked at will. What, we may ask (and Professor Peacock doubt- less will ask), did the IBA make of Granada's link with Ladbroke? If that had been formally arranged as an offer by Granada for Ladbroke, then Granada's articles would have given the IBA no leverage at all. Effective control, however, might well have passed to the Ladbroke board. There are companies and boards in higher standing: witness the case of the Ladbroke casinos. The Thames Line itself was devised as a barrier which the IBA could place between a willing buyer, Carl- ton, and two willing sellers, Thorn and EMI, without bringing the merits of Carl- ton into question. A willing seller, dep- rived of his opportunity to sell, does not at once become an enthusiastic owner, as the IBA might naïvely suppose. He might ask whether his best plan is to spend as little on his property as he can, and take out as much as he can. He might find that his franchise is worth more dead than alive. Westward Television's shares rose sharply before the last round of applications, since Westward seemed sure to lose its franchise (it did), and its valuable assets could then be sold. Southern, which lost its franchise at the same time, is still profitable: it sells old stock, it has shed its old costs (and staff). Thames makes most of its money abroad, and has won the Queen's Award for export, by giving the Americans Benny Hill. To lock an owner into a franchise he does not want, by the implied threat of not renewing it when it expires, is to encourage its holder to run it down — and is that the public service which the IBA is there to secure? The Authority's first director' general, Sir Robert Fraser, thought in terms of competition, with two companies in each franchise area, all trading program- mes with all, as eager sellers and eager buyers. But, he foresaw, if this networking were not optional it would degenerate into a market-sharing cartel. Last year Thames's managing director challenged the cartel and was fired for his pains. The pressures of the marketplace are shaking our cartelised system of commercial televi- sion, and the IBA should welcome them. But, so far from welcoming a solution, it has long ago become part of the problem.
Previous page
