ITV break-up talks spark alarm over local news
Moves towards a break-up of ITV have sparked fears the broadcaster's local news programming would be put at risk of cuts.
ITV is currently in discussions over a potential deal with All3Media, the maker of shows including The Traitors and Race Across The World, that would create a new £3bn British production powerhouse.
A tie-up with All3Media, which is owned by the Abu Dhabi fund RedBird IMI, could see ITV Studios spun out into a new company listed on the London Stock Exchange, leaving its broadcasting arm as a standalone entity.
RedBird IMI is also owner of an option to take control of The Telegraph but has been blocked from doing so by a ban on foreign state ownership of newspapers. The fund promised ministers it would sell up a year ago but has so far failed to meet the pledge.
Its talks over ITV have now triggered concerns about the sustainability of the broadcaster's traditional TV business amid a decline in advertising revenues and as audiences flock to streaming rivals.
Damian Collins, former chairman of the culture select committee, drew comparisons with Channel 4, which last year posted a record £52m deficit as it grappled with an advertising slowdown.
He said: 'If ITV switched to a system where the core channels and the public service remit is delivered by a purely ad-funded company, then the concern would be that that will be not sustainable.
'In the short-term, ITV have got to meet their obligations to their licence, in the longer run there's a concern as to whether companies like ITV wish to remain public broadcasters.'
John Whittingdale, the former media minister, said: 'I still believe that it is very difficult to sustain a purely advertising-funded channel with public service broadcasting obligations as the world changes.
'ITV have been very successful at developing their production arm, which has generated a large chunk of their revenues. But if they get rid of it, then they're sort of back to square one.'
ITV's public service obligations require it deliver a variety of UK-made programming in the public interest, including its national and local news output. In exchange, it receives access to spectrum and holds the channel three slot, guaranteeing it prominence on TV programme guides.
The broadcaster renewed its licence last year, meaning it is committed to these obligations until the end of 2034.
However, industry observers fear ITV may choose not to retain its public service broadcasting status beyond this date as the benefits of a prominent channel slot wane in the streaming world.
Any such move would spell uncertainty for ITV's regional news programming, which is thought to cost the broadcaster in the region of £100m per year.
Mr Collins added: 'The problem for a TV channel is if you're relying on a TV ad market that is dwindling, and you've got to start making cuts, where are you going to start making them? Probably on the things that are making less money.'
'Real threat'
Regional news is a costly but crucial component of broadcasters' public service remit, particularly amid a sharp decline in the number of local newspapers across the country.
It also has vocal support from MPs, who view it as a key way of gaining coverage and reaching their constituents.
ITV, which was formed through a merger of scores of regional franchises, explored plans to abandon its regional news output entirely in 2009, with programming to be provided instead by a number of independently funded news consortia. However, the plans were abandoned following opposition from MPs.
The future of ITV's local news output will be cast into further doubt as ministers explore plans for a switch-off of terrestrial TV, which is currently also slated for 2034.
Stewart Purvis, the former chief executive of ITN and Channel 4 board member, said ITV would continue to broadcast local news while it had a regional terrestrial TV network.
But he added: 'In a decade's time when terrestrial TV may be turned off I think there's a real threat to local news.'
The shift to streaming has prompted uncertainty over the future of public service broadcasting.
New laws introduced last year will require apps and programmes from channels such as the BBC, ITV and Channel 4 to be shown prominently on smart TVs and streaming sticks.
However, it is still unclear how exactly this will work and how much it will benefit broadcasters.
Sources close to ITV said the broadcaster's decision to renew its public service licence provided certainty for the next decade. They added that the company's total advertising revenue rose 2pc last year.
ITV has invested heavily in its production business, which is behind hits including Mr Bates vs The Post Office and Love Island. The division, which reported record profits last year, now accounts for roughly half the group's revenues.
Chief executive Dame Carolyn McCall has been exploring a potential sale or spin-off of the studio business amid concerns the company is undervalued.
Early-stage discussions have taken place between ITV and RedBird IMI, the UAE fund that bought production giant All3Media for £1.2bn last year.
The talks have drawn criticism from Conservative MPs given RedBird IMI's botched takeover of The Telegraph and its failure to find a new buyer a year after it told ministers it would.
The Liberal Democrat leader Ed Davey in February said 'their priority should be getting that sorted and sold before turning their attention elsewhere'.
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