The British television industry hasn't got what it takes to compete in Europe, let alone globally
For the barons of UK commercial television, this has been a dismal summer. After a huge advertising campaign, a knock-off of the US TV hit Survivor hit our screens with all the impact of a feather boa.
Now it is the survival not of game show contestants but the two big players of the UK television industry ' Carlton Communications and Granada ' that's in question.
Share prices of both have plummeted during the past year. Granada went from 260p in May 2000 to 159p now, while Carlton has fallen from 900p in July 2000 to 351p now. Both were hurt by a slowing economy, which depresses their main source of revenue, advertising. Both have also suffered from the near £1bn it cost them to create ITV Digital, a pay-TV multichannel service which competes with (and loses to) BSkyB.
But most of all, a wall has started to crumble. For years, UK broadcasters have operated in a highly regulated market. Gradually, that is turning into a free and competitive market. Behind the protected wall, though, both firms have been revealed as puny creatures, unlikely to last for long once viewers are offered real choices.
That points to one of the great mysteries of the modern European economy ' why has the UK not been able to produce a media company of any consequence? Germany has the mighty Bertelsmann, France has the new Vivendi Universal, and Italy has Silvio Berlusconi's Mediaset empire. But why is that the UK, the world's fourth largest economy, can only produce a couple of minnows that between them are unable to effectively organise a single national network.
None can compete on the European, let alone the global, stage. None can claim a significant slice of one of the world's biggest and fastest growing industries.
True, there is Reuters, but that is involved only in the wholesale market. And there is BSkyB, controlled by Rupert Murdoch's News Corp.
Besides those, the largest British media business is Granada with a market value of £2.7bn, and Carlton with a value of £2.3bn. Put those alongside Vivendi, with a value of 73bne ($64bn) or Viacom, with a value of $89bn, and they look like dwarfs in a world of giants.
The UK can produce world-class oil firms, pharmaceutical giants, powerful mobile telecoms groups and huge advertising agencies, but it cannot produce a media business of any weight.
That is important, not because media businesses are of any intrinsic value in themselves but because it illustrates the weaknesses from which the UK economy still suffers. The English are prone to smugness, as foreign critics occasionally point out.
The UK economy has made long, purposeful strides towards a genuinely free market in the last two decades, but large chunks of its economy remain subject to the whims of a nannying and interfering State.
The failure of the UK media industry is a lesson in how the British government still conspires to ruin its own economy. There are two reasons why the British government bears the brunt of the responsibility for the dismal performance of the UK's media.
One is the creation and support of the BBC. The other is the insistence on creating local monopolies.
The BBC produces many fine programmes ' although not nearly as many as it claims. But mostly it uses a regressive tax ' the TV licence fee applicable to every UK household that owns a television ' to make rubbish sitcoms and game shows. There is nothing wrong with game shows, but the private sector is quite happy to make them in abundance.
You don't need the State to do it ' and if you do, you inevitably crowd out potential rivals. The unintended consequence of the BBC is a stunted and tiny private sector.
The regulation of ITV has been even more dismal. A founder of the network once described owning an ITV franchise as a license to print money, and indeed it was. Each regional ITV franchise had a monopoly selling television advertising in its area.
Even when a second commercial network was launched in the 1980s, ITV retained the rights to sell its advertising. It was only four years ago, with the launch of Channel 5, jointly owned by Bertelsmann Associate, RTL and Pearson, that competition in mainstream terrestrial television advertising finally arrived in the UK.
Licences to print money are corrupting: they are bad for the body that awards the license, which quickly becomes hooked on the power and patronage that bestows; and they are worse for the person who receives one.
Sure, it is great to be able to print your own bank notes. The trouble is, when the presses stop rolling, you don't have a clue how to earn money in the real world. That is what has happened to ITV, now mostly owned by Granada and Carlton. A dominant State provider and a fragmented and monopolistic private sector ' it is surely impossible to devise a structure less likely to produce thriving, commercial companies. It is almost certainly too late for the UK to produce a significant media company now. In due course Granada and Carlton will be swallowed by a foreign-owned giant ' probably RTL or BSkyB.
There is no cause for sadness there. Both companies are complacent organisations with little to recommend them.
The pity is that the UK was unable to build a proper media business.
That failure should be a reminder that, although the British economy has revived in the past two decades, it still has huge weaknesses. The most glaring of those is a government that has still not learned that it is only through free competition that strong companies emerge.
For years the British have smugly congratulated themselves on making the best television in the world, a claim that never stood up to scrutiny. Now it looks likely to become the only major economy without a domestically owned media business of any significance.
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