THE corporate fate of Scottish Television has been a running plot line for more years than I care to remember. I’ve lost count of the number of times southern-based or foreign media predators were, reportedly, marching up Renfield Street in Glasgow towards Cowcaddens, poised to consolidate control of what some still choose to call ‘commercial’ broadcasting north of the border.
The Mirror Group, Carlton Communications, Granada and – since its formation in February 2004 – ITV plc have all figured, at one time or another, in who might emerge as the successful hitman.
Much of the speculation has swirled around control of two substantial minority stakes in the STV business.
The first was originally held by the Mirror, the result of an “entirely supportive” but surprise raid in 1994 on the television group’s share register by the Mirror Group’s Scottish subsidiary, The Daily Record and Sunday Mail Ltd.
That stake passed to Granada at the end of the 1990s. And through the defensive merger of Granada and Carlton in 2004, it remains in the hands of the dominant ITV network player to this day.
The other big minority holding was originally sold in 1995 to the American cable television group, Flextech, a symbol of a strategic, content-sharing alliance. Flextech was then acquired by Telewest in 2000, adding a fresh name to the list of potential predators.
However, the debt-burdened Telewest was in no position to take its interest any further. And by the time the stake was put up for sale, in late 2002, the obvious favourites to buy it, Carlton and Granada, were too busy protecting their own destiny to spend hard-to-come-by cash on a marginal consolidation.
So, despite the serial rumours over a decade or more that its days were numbered, Scottish Television – or rather its corporate parent SMG – had a go at the consolidation game itself. It acquired the Grampian franchise in the north of Scotland, bought Virgin Radio, owned this newspaper group for a time, and even built a powerful minority stake in Scottish Radio Holdings.
But its dream of creating a Scottish-headquartered, multi-media player faltered. It bought too freely at the top of the market and has been forced into retreat ever since. With its share price in the doldrums and its chief executive recently deposed, it is now on the receiving end of a cheeky merger proposal from UTV, its opposite number in Northern Ireland, designed to give its suitor the upper hand.
It is in play once more, with much speculation that private equity houses are preparing rival bids, fronted by ambitious media executives. So is a decade or more of speculation finally bearing some takeover fruit? Are Scottish Television and SMG’s years of corporate independence finally running out?
Let’s state the obvious first. SMG’s long-suffering shareholders are not going to sell unless they think they can extract terms that offer more value from a deal than sticking by the existing set-up. And no-one is going to buy SMG unless it thinks it can make money from the deal.
Central to both considerations is the commercial fate of the newly-unified television franchise in central and north Scotland. It still accounts for some 80 per cent of total operating profits. But it is struggling – as ITV as a whole is – because it is no longer, in this digital and increasingly multi-channel, multi-media age, the only ‘commercial’ alternative when customers want some visual home entertainment.
And whatever its past glories, ITV (as a network) is certainly no longer the most attractive alternative. Ask Andy Harries, controller of drama, comedy and films for ITV Productions.
In a remarkably frank interview in yesterday’s Media Guardian, Harries said: “Don’t you think that (upmarket viewers) have stopped watching ITV because it has become unwatchable? Hundreds of people tell me this. There is too much clutter, and it is putting people off. ITV is so unfashionable. It doesn’t have to be like Channel 4, but it should be modern. It looks like bargain basement.”
Harries is only one critical voice, albeit a highly-respected one. But in making the case that ITV has comprehensively lost its way over the past decade, he is simply reinforcing what falling ratings and audience share are also telling us. This is a business which, at its very core, is failing to compete with the licence fee-funded BBC on the one hand and the burgeoning pay-to-view stations on the other.
That commercial failure has already taken the scalp of Andrew Flanagan at SMG and now Charles Allen at ITV. This business, as a whole, is facing challenges much too serious to be resolved by another spin of the takeover wheel. If it can’t find creative talent to replace the accountancy-tendency in the boardroom and stop that rot, it doesn’t really matter who takes over – or merges with – whom. It’s all a recipe for managed decline, squeezing out what value can be found along the way.
Alf Young (this piece first appeared in The Herald newspaper on August 22 2006 Thanks to them for permission to reproduce).