29/08/2008

The owners of Scottish television station, stv, are to hire an independent auditor to ascertain the financial relationship it has with ITV plc - which owns all the ITV regional franchises in the UK except in Scotland, Ulster and the Channel Islands.

It follows yesterday’s announcement of SMG's interim results and those of ITV’s almost a fortnight ago. On the one hand, ITV is claiming it subsidises stv, UTV and Channel to the tune of £25 million (for instance, by being able to broadcast an ITV programme such as Coronation Street relatively cheaply); conversely, UTV and stv disagree to the extent ITV could be benefitting from its relationship with the three stations - from the likes of being able to sell advertising UK-wide - by as much as £75 million.

Said SMG yesterday: “Earlier this month, ITV reported at its interim results a £25 million benefit to the three franchises of stv, UTV and Channel which form the Channel 3 network.

“We strongly refute this position. It is our intention to reduce our dependence on ITV generated revenue from 70 per cent in 2007 to some 50 per cent by 2010.

“Much has been made in recent weeks of the dependence of the three independently-owned television licences (stv, UTV and Channel TV) upon ITV, but we believe it should be clearly understood that in the case of stv at least, ITV derives significant benefits from our custom and direct financial support.

“We make a substantial contribution to the ITV network programme costs, which they in turn can exploit on their other channels and online, as we can do in the case of our own online service, and as our national advertising sales agent, they are able to offer advertisers a UK footprint against the growing competition, something that should never be under-estimated.

“We estimate the benefits to ITV plc from the federal channel 3 structure to be in excess of £75 million. We will engage an independent third party to validate this position.”

UTV - which revealed its interim results earlier this week - are co-commissioning the study.

Quite why ITV plc is saying what it is might have something to do with a review of public service broadcasting being conducted by the broadcasting regulators, Ofcom. This is Ofcom’s second review of PSB programming, such as regional news, which is traditionally expensive to produce compared to the advertising revenue it attracts.

Following Ofcom’s first review, there were significant changes to ITV1’s programme requirements, including a reduction in regional non-news programming. The future of news - in  particular regional news on ITV1 - is a core focus of the current review. A publication from Ofcom marking the second phase of the  review process is expected next month, with the full review concluding early next year.

In a conference call with journalists yesterday, SMG chief executive, Rob Woodward, was asked if the spat had soured relations with ITV.

He replied: "Not at all, we have a good productive relationship with ITV and will continue to do so. ITV, UTV, the whole media market is under pressure … [it is about] finding an equitable way forward for an agreement between ourselves and ITV."

Yesterday, SMG shares finished at nine pence, down from 14p three months ago.

* Send your Scottish media news and gossip, in the strictest confidence, to  info@allmediascotland.com