COMMUNICATION
The PIB report on ITV
BILL GRUNDY
Never having been much of a fan of Mr Aubrey Jones and his Prices and Incomes Board, I was not surprised to find that his swan-song, last week's report on commercial television, contained lots of false notes.
However, the report did manage to make clear that the industry really is heading to- wards bankruptcy. Now every schoolchild knows that the chief reason for this is the level at which the advertising levy is operat- ing. It is entirely in character, therefore, that in its terms of reference the PIB was told that it should not examine this absolutely central point. Just how central it is can be seen by comparing a few figures. The profits of the industry for the financial year just ended were about £6} million. Three years earlier they were £19 million, which converts to about £22 million at present prices. Extra- polate that curve and it won't be long before you find yourself in the red. Now note that the levy was producing about £29 million a year in 1969, and even after being changed in the light of the industry's rapidly-deter- iorating position, it is still designed to pro- duce £23 million in a full year. An allevi- ation of the levy would therefore look to be absolutely essential if the industry isn't to go bust pretty soon.
, The bit on profit forecasts is fairly inter- ' esting. The PIB report says that the con- tractors believe that, at constant prices, their profits, before interest and tax, will have fal- len by 1974 to £2 million. But of course the contractors don't believe in constant prices, who does? In fact, they believe that allowing for a 6 per cent annual inflation, 1974 will see the industry losing £9 million a year. The report rather confusingly estimates the 1974 figure to be a profit of £9 million, and then goes on to say that 'if an average rate of increase of 6 per cent per annum . . . were assumed, the contractors' total costs in 1974 would rise to a level that would produce very considerable losses'. The PIB then makes confidence in its calculations even harder to sustain by saying 'since there is no long experience by which to judge the effect of inflation at the present rate on revenues it is impossible to be precise about the 1974 pos- ition'. So pay your money and take your Choice. My own contacts with the industry suggest that there is a real feeling of depres- sion about the financial situation and that othing less than a reduction of the levy Will blow away the blues. The report then looks at profits expressed n terms of the rate of return on capital employed. The figures here vary according to Which method of calculation is used- traight return or discounted cash flow—but they still reveal a rate below that which the Board considers adequate for the industry,
The actual words are: the rate of return on capital derived from the industry's fore- casts for the current contract period is sub- stantially lower than the level of return re- quired in order to support a sound financial structure, assuming possible changes in the franchises to impart to the industry a peculiar risk'.
The last phrase brings up some other points. First, there is the point that tele- vision, like newspapers, is not a nuts and bolts industry. Its products are not standard- ised, nor can the production methods em- ployed be standardised. Furthermore, the industry doesn't even sell what it manufac- tures. It makes programmes, but it sells ad- vertising time. There is no necessary con- nection between the two. Better, i.e. more efficient, production methods need not result in the sale of more time. In any case, some companies' production methods aren't sus- ceptible to much more streamlining. Gran- ada, for example, are fond of pointing out that they produce as many programme hours as other _companies but do it with far less staff. This. of course, leaves them wide open to the reply from the unions: 'Yes, and it's beginning to show, so what about more staff?' But the point is how does a company such as Granada improve its efficiency? By amalgamation with other companies, as the Board suggests? But who with? With tiny Border, about one-fifteenth the size and in a very shaky financial position? And what sort of local coverage would the Solway Firth area get if the headquarters of the company moved to Manchester, over 120 miles away? If not with Border, then who with? Yorkshire Tv? You must be joking. It's only two years since the 1TA hacked Yorkshire out of the then Granada franchise and set it up as a separate programme area. And the Board suggests there should be a coming-together again, does it? (It doesn't actually, but since it doesn't make any spe- cific proposals one can only try out a few possibles for size.)
The case of the London area has the Board baffled. It would not `go so far as to suggest that the creation of one London company is the only answer. It considers that one solution might be a link between each of the London contractors and a neighbour- ing contractor'. I find this difficult to accept. The Board stresses that 'an endeavour should be made to retain balance in the struc- ture' and yet it is suggesting—or is it?— that, say, Thames should amalgamate with Southern TV. The result of such a merger would be a bigger giant than exists at the moment. So where's your balance then? And in a splendid piece of time-wasting the report estimates that if trv were just one company there would be a saving of 'in ex- cess of £10 million per annum'. It then ad-
mits that historically this is impracticable, and in any case they're not recommending it. Well, they'd better not. Independent tele- vision was set up as a federation precisely because proper regional coverage was an aim: the [Ts has never thought that its plural and regional structure is the most economical w3y of operating, but then that's not what it was after.
Nevertheless, despite the confusions, the contradictions, the half-bakedness of some of its suggestions, the report has been wel-
comed with reservations, by the ITA and the Independent Television Contractors Asso- ciation. The reasons for that are obvious. Despite the fact that the Board was precluded from considering the level of the levy, it has managed to make quite clear the pretty parlous financial state of the industry, and to prove that the howls we've heard in the past were not just PR whinings. They do con- tain some element of that, of course. No- body who has once made large profits likes to make less. But the report shows that there is reality behind the complaints even from the major companies. As an example, I am informed that one of the Big Five pro- gramme companies is convinced that one of the other four will be in the red this coming year, if it isn't already.
The second reason why the report has been welcomed is that it suggests present contractors should be given security of ten- ure, providing they behave themselves. The shareholders of Tww and Rediffusion might agree with that! But the recommendation is not without dangers. It suggests a system of warnings to offending contractors; two warnings during the period of the contract and you're out. It sounds all right. But who decides on the warnings? It is not unknown for quite senior 'TA officials to see a pro- gramme and approve it, and then to find the Authority raising merry hell when the pro- gramme is transmitted. Could a contractor be 'warned' in such circumstances? But. more important for all who want commercial television to be more than milk and water, what would be the effect of one such warn- ing on a company? Wouldn't it be abso- lutely inhibiting when it came to programme content?
In considering ways in which the industry's condition might be improved, the Board looks at the suggestion that broadcasting hours, at present controlled by the Govern- ment, might be increased. This would gen- erate more revenue and at the same time result in a more economic usage of capital and labour within the industry. The Board, however, finds itself unable to make a 'straight recommendation' on this one, and fogs the issue further by saying that the sac might want to follow suit, which would in- crease its financial problems, thus making a rise in the licence fee even more necessary. The link between extending hours for the commercial companies and extending them for the BBC, which already has two channels, is one that escapes me completely.
But then you could say that about a lot of the report. Most elusive of. all is why its terms of reference were so crippling. Could anything be more pointless than being told to study the problems of an industry but to be precluded from considering the central one, the problem of the level of the levy? Despite its good points, therefore, that one fact nukes the report irrelevant; as irrele- vant as Hamlet without the Prince, the Queen, the King, Polonius and his kids, and the rest of the full supporting cast.
Previous page
