Curious times at UTV…
- Michael Grade – the ITV boss is piling pressure on UTV, claiming he subsidises it to the tune of £25m and he wants some payback.
- Lynda Bryans – no contract renewal. Carolyn Stewart doubles up. Reducing the talent wage bill is rarely a good sign.
- UTV Life – cuts. Voluntary redundancies are welcomed, apprently. Future uncertain.
- Digital radio plans – in doubt. Channel 4 withdraws from new station launches – UTV was part of the consortium that backed it. This is imperilled.
- Local output – UTV is permitted to produce fewer locally made programmes due to falling advertising revenue.
- Interim results – television operating profits were down 15% (£800,000). Whereas non-televisual profits were up 32%.
To the layman, it seems that the trajectorry is downward for UTV television.
There is no question that UTV is a major media player. Its expansion has transformed it into one of the great success stories of the local business community. And yet something curious is happening in UTV.
When it comes to expansion, UTV is a seemingly unstoppable force. But while it continues this expansion shares have dipped by around two-thirds in less than a year. Then there is the rights issue that took place in July. It needed the money to refinance its debts.
As the Chairman states, expansion has been funded through borrowing, and not cash flow.
… in the light of investor concerns about high financial gearing, we
decided that, on balance, it would be prudent to reduce our debt levels through a rights issue and to accelerate the process of refinancing. The rights issue, which raised £49.9m, and the re-financing were undertaken in the most volatile of markets but were successfully concluded by the middle of July, securing debt funding through until 2013.
Debt funding was used to finance our strategy of diversifying away from a pure television business.
UTV’s nose for new radio and new media acquisitions has been peerless. Talksport and Tibus are inspired buys. But is this strategy about opening up exit routes from the television business?
Or, with the financial sector in turmoil, will UTV yet pay the price for an expansionary strategy financed on debt?
Not so long ago, UTV saw an opportunity to pool its resources (spread expenditure, rationalise headcount, make efficiency savings etc etc) but the merger with SMG fell through. A grand UTV/STV alliance might have been able to impose itself as a monopolist in the regions – by concentrating market share it can impose itself more on suppliers (independent producers and advertisers) and offer greater benefits to customers/audiences (while making its collective assets/potential for future profits attractive to potential buyers).
Could UTV PLC (as owner of the television business) be broken up by parent company UTV Media? After all, according to The Times, the licence to produce programming over here is not going to be worth much after 2012.
ITV wants to be left alone to forge its own path. If UTV does the same, perhaps its own path is away from programme-making. In the aftermath of the rights issue, UTV must lead its shareholders (who will not be pleased by the performance of the television business) toward highly profitable returns.
This is a complicated area. But either way, Ofcom has ruled that there will be fewer hours of local programme making aired on our local channel. Irrespective of the reason, this result is a very great shame for the local industry.
This is a sad reversal for creative industry here. As film-making takes giant leaps forward, television production looks to be moving backwards. Does DCAL/DCAL Committee have a view on any of this?