Ofcom relents to licence fee cuts for ITV, SMG |
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Thu, 30 Jun 2005 06:05
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LONDON: ITV’s many months of lobbying has finally paid off with regulatory body Ofcom relenting to slash licence fees to less than £80 million for its 12 licences for 2005.
Last year the ITV group had had to pay £215 million and had been urging Ofcom to review the licence fee system. It had protested that the rise in digital television was taking away ITV1’s audiences and reducing advertising revenues. Digital television has been a growing challenge for ITV which was struggling to cope. Additionally, it found itself “unfairly disadvantaged compared with rivals such as Five which, last year, paid less than £20 million and BBC, Channel 4 and BSkyB which were not required to pay anything at all.”
The reduction was critical to the group as it would now be able to take its digital strategy forward. It’s a larger cut than the £90-95 million that analysts had expected. Had Ofcom not offered the fee cuts, ITV might have been forced to abandon its licence for public service broadcasting.
The group is Britain’s biggest commercial broadcaster owning channels such as ITV1, which continues to be analog, ITV2, IT3, ITV4 and ITV News, channels which are digital. The group also has a 75 percent stake in GMTV breakfast TV channel. The group had planned to invest approx £1 billion in programming this year. The slash in licence fees now allows the group to go forward with its switchover plans to digital TV.
Ofcom’s new terms have been welcomed by the group as it would mean further drop in cost for licences beyond 2005. Licence fees comprise a fixed cash sum and a variable sum which depends on earnings from advertising on analogue channels. According to Ofcom’s new terms, ‘fixed cash sum’ for 2005 would now drop to £4 million - a huge difference from the £70 million paid last year.
The ‘variable sum’ will account for 95 pct of 2005, and this is expected to reduce progressively with growth in digital take-up. Assuming the switchover to digital TV is completed by 2012, variable payments would drop to nil by then. ITV would then have to pay only £4 million according to the 2005 terms. The regulatory body confirmed that future licence fees would be dependent upon digital take-up and advertising revenue.
Ofcom has also slashed licence fee for SMG Plc which owns Scottish TV and Grampian TV franchises. For 2005 SMG will have to pay £1 - 1.5 million compared to £4.5-5 million for last year.
Licencees will have to inform Ofcom before July 25 that the terms are accepted. Upon acceptance by all licencees, the revised terms will be backdated to apply from January 1, 2005.
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