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UK Govt Mulls Relaxation of ITV Ad Rules - WSJ.com
UK Govt Mulls Relaxation of ITV Ad Rules By Adrian Kerr of DOW JONES NEWSWIRES LONDON (Dow Jones)--The U.K. Office of Fair Trading Friday asked the Competition Commission to consider changes to the way ITV Group PLC's (ITV.LN) advertising rates are governed, paving the way for a relaxation of the broadcaster´s regulatory burden. Contract Rights Renewal (CRR), which w......

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UK Govt Mulls Relaxation of ITV Ad Rules

By Adrian Kerr of DOW JONES NEWSWIRES

LONDON (Dow Jones)--The U.K. Office of Fair Trading Friday asked the Competition Commission to consider changes to the way ITV Group PLC's (ITV.LN) advertising rates are governed, paving the way for a relaxation of the broadcaster´s regulatory burden.

Contract Rights Renewal (CRR), which was introduced to protect advertisers following the creation of ITV through the merger of Carlton and Granada in 2003, links ad rates to ITV1´s share of commercial impacts, which in turn measures the proportion of overall TV advertising seen by ITV viewers.

As audiences fall, ITV isn´t allowed to increase its ad rates to make up the shortfall, even as its earnings are battered by the downturn in advertising caused by the economic slump.

"Changes in ITV1´s market position and program delivery since CRR was introduced in 2003 mean it is now time to take another look at it," OFT chief executive John Fingleton said in a statement Friday.

"We recommend retaining some protection for advertisers and media buyers so that all parties have an equal playing field in what are challenging economic circumstances."

The OFT said that while flagship channel ITV1´s market position has declined, "it remains almost the only provider of very large commercial audiences, which are of particular value to some advertisers."

There have also been changes in the way the ITV1 schedule is delivered, including a high definition channel, which the Competition Commission also needs to consider.

The OFT launched a consultation on CRR in January to explore a range of possible outcomes including its complete removal, keeping it as it is, and various options in between. The Competition Commission will now make a final decision.

The OFT´s referral to the Competition Commission was as expected and Friday´s statement was short on detail, said Sam Hart at Charles Stanley.

While the CRR system is likely to be relaxed to the broadcaster´s benefit, Hart said, "there are much bigger issues affecting ITV," including the ad downturn in the short term and the entire ad-funded TV model in the longer term, he said. Charles Stanley has a reduce recommendation on the stock.

ITV, the U.K.´s largest commercial free-to-air broadcaster, has seen its earnings slammed by the advertising downturn and in 2008 swung to a full-year net loss. To shore up its financial position it has said it will cut jobs and programming budgets, sell assets and scrap its dividend. It also set an earlier timetable than expected for Michael Grade´s exit as chief executive.

ITV has previously put a figure of GBP300 million on the cost of its regulatory burden, including Contract Rights Renewal, which it has long argued should be reformed.

"ITV welcomes the fact that the OFT has now sent its report and recommendation to the Competition Commission in its review of CRR," the broadcaster said in a statement Friday. It said it will study the detail of the OFT´s full report when it is published, and provide the Competition Commission with "legal, economic and market-based evidence to support the case for abolition."

At 0819 GMT, ITV shares were up 4.7%, or 2 pence, at 39 pence, making it a top-10 riser in percentage terms on a broadly higher FTSE 250.

Company Web site: www.itv.com


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