Talks with US broadcaster EW Scripps slow to crawl over issues including state of ad sales contract, held by Channel 4
A dispute over a critical advertising sales contract is understood to have contributed to a hold-up in the sale of Virgin Media's 50% stake in UKTV to US broadcaster EW Scripps.
Scripps has been the frontrunner in the drawn-out process to buy the UKTV stake since late last year, but two sources said that negotiations have slowed to a crawl over a number of issues including the state of the UKTV ad sales contract, which is held by Channel 4.
The complication has not derailed the deal but one insider said that Scripps executives were "no longer camped in a hotel in London" after the US broadcaster and newspaper group emerged as the preferred buyer in November.
Although UKTV is a pay broadcaster, advertising still makes up close to 50% of UKTV's total revenues so the disagreement has thrown uncertainty into the negotiations between Scripps and Virgin Media over the correct value to place on the stake. The other 50% of UK TV is owned by BBC Worldwide.
"Channel 4 were unable to monetise the contract as planned in the deal season and an argument has broken out over the exact interpretation of the contract as they want to share the pain with UKTV," said a source with knowledge of the situation.
Last July Channel 4 struck a deal with UKTV, owner of channels including Dave and Gold, to handle its TV and online ad sales for the next decade.
Channel 4's enlarged sales operation would therefore have greater leverage with advertisers, and UKTV would secure better revenues than it could achieve by bargaining alone.
Channel 4 had been battling to meet sales targets amid some initial "teething troubles" ? and the Hollyoaks broadcaster came under further pressure at the end of last year when some media agencies balked at signing up the annual TV sales deals at the rates it wanted.
However, Channel 4 insiders indicated that any problems had now been resolved and that the broadcaster had successfully completed all its annual negotiations for 2011 with ad sales agencies. Channel 4 also said it was on track to meet David Abraham's target of generating �1bn in sales revenue in 2011 for both Channel 4 and UKTV combined.
Neverthless, Channel 4 is underperforming the advertising market in the first quarter of 2011. Total TV advertising is expected to be ahead by about 6%, and while it is understood to have increased ad revenues, its performance is not up by as much. That would indicate Channel 4 has given up some market share.
The protracted negotiations over Virgin Media's UKTV stake have also tackled numerous issues thus far including video-on-demand rights for UKTV programmes and how to work within a joint-venture partnership with BBC Worldwide, which will retain editorial control of the channels. BBC Worldwide can effectively exercise control over who buys the stake.
One problem that Scripps is understood to have wrestled with is how to gain operational control of the UKTV business, a necessary requirement to be able to properly consolidate the business into its financials.
Scripps Networks focuses on lifestyle media and owns US TV brands including the Cooking Channel and the DIY Network. The company has been on a major expansion drive internationally, taking stakes in numerous channels.
"The deal is still inching along but there are definitely still problems," said one source with knowledge of the negotiations.
Last year, Scripps launched the Food Network in the UK and Europe, home to shows including Nigella Express and Great British Menu, in partnership with Chello Zone.
Virgin Media and UKTV declined to comment.
In a statement Channel 4 said: "Channel 4 and UKTV are both delighted with the performance of the 10 Year Adsales Contract agreed last year and integration has gone very smoothly. Day-to-day trading is going well and both parties are looking forward to a long and successful partnership."
? To contact the MediaGuardian news desk email editor@mediaguardian.co.uk or phone 020 3353 3857. For all other inquiries please call the main Guardian switchboard on 020 3353 2000.
? If you are writing a comment for publication, please mark clearly "for publication".
Source: http://www.guardian.co.uk/media/2011/feb/17/virgin-media-uktv-ew-scripps
television advertising types of internet advertising b2b advertising advertising jobs
No comments:
Post a Comment