Tough truths about our TV minnows

WE HAVE managed to botch the redrawing of the takeover rules for ITV companies - just as we botched the last licensing round; just as we will probably botch the reform of the BBC charter in 1996.

Is that unfair? Well, there is no dispute that the last licensing round turned out to be extraordinarily capricious: some contractors won with peppercorn bids - pounds 2,000 a year in the case of Central - because they gambled that they would not be challenged; others paid far more.

Central's bid - whose value was revealed last week when Carlton offered pounds 758m for the company - was, in a way, a brilliant coup. But there is something deeply unsatisfactory about a system that allows a company to be worth pounds 750m when its core asset costs less than running a second-hand car.

The proposed merger of Carlton and Central also shows the flaw in the revised ITV takeover rules. Last week Peter Brooke, Secretary of State for National Heritage, explained that the revision was a response to the industry's call for a relaxation of restrictions so that it could compete better in world markets, while preserving ITV's regional programmes. Large ITV companies, Mr Brooke said, would be able to hold two provincial licences. But the two London companies would not be allowed to merge and the regional companies would still be required to provide local services. The wave of takeovers duly began.

There is nothing wrong with Mr Brooke's aims. The problem is that this revision will not achieve them.

We ought to be able to create world-class television companies. We have a wealth of programme-making talent, the glory of the English language and a powerful culture which, in popular music, has proved supremely exportable. Global television is just the sort of area of economic activity we should be seeking to develop. Not only is it growing very fast, it is an activity in which we cannot easily be undercut by Taiwan, still less by China.

Britain does have much to learn from the other 'Anglo' societies in building export products. We may win lots of prizes but we are not making money. In 1985 we had a small surplus of pounds 24m on television programming. By 1991 that had become a deficit of pounds 100m, and the consultants Booz Allen & Hamilton estimate that this deficit will reach pounds 600m by 2000.

Given our advantages of culture and language, this is dreadful. Obviously we have most to learn from United States, but also from Australia, which has scooped the just-back-from-school soap opera audience and pioneered such wizardries as putting a television camera in the cricket stumps.

But the problem is not principally our programmes; it is our companies. For, with the exception of the BBC, they are far too small. Much has been made of the supposed giant that will be created by the Carlton/Central merger. In world media terms, though, it is a middle- ranker. The other soon-to-be merged companies will be even smaller. As Ian Hargreaves pointed out in last month's paper from the think-tank Demos, the only world-class player we have is the BBC. In a recent survey of the top 20 providers of broadcasting facilities in the UK, the BBC was twice as big as the next 19 put together.

So the revision of the rules, far from allowing Britain to develop world-class companies, merely allows our small television contractors to become a little less small. Nor will it achieve its second aim: the preservation of local programmes. Of course, the small ITV companies will go on providing what is patronisingly called 'local content' and viewers will have a few programmes devised to satisfy local content rules. Unlike in America, however, there are no local stations as such, providing a service 18 or more hours a day. Only in a few cable systems have programmes made by locals rather than outside professionals been developed.

What is to be done? It must surely be right to want to try to develop three or four - more if possible - British-owned world-class media companies. Within a decade there is likely to be a global television market, with most people in the industrial world having access to 100 or so stations - if they want it, to the same ones. If, for example, we want to tune into US domestic television we will be able to, just as people in the Netherlands routinely watch the BBC.

Whether we receive these services principally by cable, or by satellite, or by BT or Mercury over our telephone wires, is secondary to the fact that the number of stations will grow explosively. It is easier to see the growth than to guess the winning delivery mechanism.

Looked at brutally, the best chance of our getting three or four world-class players would be as follows. First, we must allow complete freedom of mergers both within the ITV network, even if it means ending up with one company, and between publishers and television stations. In world terms, the whole ITV network is equivalent to only one medium-sized firm. It is a Rover or a BMW, not a General Motors or a Toyota.

Next, as that Demos paper argues, the BBC must be privatised. It is probably just big enough to compete internationally. But if it remains hamstrung by living within the public sector, subject to political pressures, it will not be able to generate the competitive drive to win international viewers and will find its UK market share shrinking. Its place in British culture could be preserved by appropriate regulation.

Third, our largest telecommunications company, BT, should be allowed into the television business. Potentially we have here, if not a GM or a Toyota, at least a Nissan or a Ford. BT's total revenues are roughly 10 times that of either the BBC or the ITV network. That is world class. Other telecommunications companies should be free to enter the market if they want to.

Finally, aside from encouraging the giants, we should develop the midgets. The cable companies are starting to feed small-scale local stations into their systems. If BT could deliver programmes to homes over the phone, then an opportunity to create genuine community television would spring up rather as Channel 4's purchases of independent programmes have created a whole new industry of small-scale programme makers. A few of these midgets would become competent exporters, a tiny minority world stars.

This will happen only if we realise the tough truth, that television is like any other business in the process of transformation from a domestic industry to an international one. We have the skills in this country, but we have a structure designed to make us fail.