City questions benefits of media cross-overs

MAI and United led the way, to be followed now by an all-Scottish affair. Mathew Horsman delves deeper

Now that two newspaper-television mergers have been agreed - the pounds 3bn link between MAI and United earlier this year and yesterday's agreed takeover of Caledonian by Scottish TV - the City is beginning to take a closer look at the whole idea of cross-media ownership. And many analysts do not like what they see.

Are there really any synergies between commercial television and old- fashioned print media? Gus Macdonald, chairman of STV, certainly thinks so, citing the prospect of cross-promotion, tiered advertising sales, common back office, even some shared use of news-gathering and archives.

But in the words of one leading analyst: "The connection between broadcasting and newspapers is very tenuous and untested".

Certainly the tie-up between United and MAI has shown few signs to date of having created any new value for shareholders. Launched, by most accounts, as a defensive move against the unwanted attentions of Michael Green's Carlton Communications, the new company, United News & Media, has so far only tentatively explored ways of bringing the television and print businesses together, largely through a cross-promotion plan to market the new Channel 5, which is 30 per cent-owned by United, in the pages of the group's Express titles and the Daily Star.

"Everybody thinks that Rupert Murdoch developed Sky Television thanks to the Sun and the Times," said Louise Barton, an analyst at Henderson Crosthwaite. "In fact, the cross-promotion was pretty marginal. Sky added subscribers because of its programming, not because of the Sun."

In the case of the Scottish deal, the view is mixed. Many in the newspaper industry concede that the geographic overlap of the two businesses give the merger some justification. Mr Macdonald's contention that a "wider revenue base from local and national advertising would be created" strikes many as realistic. Right now, about 90 per cent of STV's advertising is national, directed out of London. In the case of Caledonian, about 90 per cent of its advertising is local.

"We would like to rebalance that ratio if we can," Gary Hughes, STV's finance director said.

But there are grave doubts that other efficiencies will flow from the merger. Certainly the idea that common news gathering could be used for both television and print is rejected by most industry sources. "Yes, you might be able to use a common data base for library and archive material. But the two businesses of broadcasting and print publishing have very little else in common."

Mr Macdonald points out that STV has a library of regional programming that could be used for photo stills in the Caledonian titles. But he concedes that there are limits to how much the two companies could be integrated. Leading print journalists at the Herald would not be allowed to figure prominently on STV's television schedule, for instance, because of strict rules enforced by the Independent Television Commission on "undue prominence."

The same rules have caused problems at Associated Newspapers, which publishes the Daily Mail and operates the cable-exclusive news and entertainment service, Channel One.

There may in the future be more room for cross-fertilisation between the group's magazines and its television schedule, however, if the ITC agrees to water down strict rules against "masthead" programming, whereby a TV show could be branded with the same name as a specialist magazine.