Central Independent Television Business Information, Profile, and History

History of Central Independent Television

Since 1993, Central Independent Television has been an operating unit of one of Great Britain's largest broadcast television and video companies, Carlton Communications plc. Central was ranked third among the nation's independent television (ITV) broadcasters when it received a £760 million (US$1.1 billion) takeover bid from number-two Carlton. The combination of these two companies' operations formed Britain's largest independent broadcaster, with the ability to reach more than one-third of the nation's population and a 30 percent share of the ITV segment's annual advertising income.

Even before the merger, Central boasted ITV's largest geographic reach and its biggest audience, encompassing nine million homes in the British Midlands region. The company's award-winning resumé of programs has included Spitting Image, the 1980s series that used puppets to parody international politicians and celebrities; the Viewpoint series of documentaries; and some of ITV's longest-airing drama series, including Boon, Inspector Morse, and Soldier, Soldier.

Postwar Roots

Central's roots as a broadcaster date back to 1954 when independent commercial television was introduced in England to break the monopoly of the BBC, the country's state-run television network. In February 1956, Independent Television (ITV) arrived in the Midlands with weekend broadcasts, which were replaced by daily programming by the end of the year. During the weekdays, programming was handled by Associated Television (ATV), a subsidiary of Associated Communications Corporation, and by ABC on the weekends.

ATV was granted the franchise for the Midlands broadcasting operation in 1968 and held it until January 1982, when the Independent Broadcasting Authority (IBA), Britain's television regulatory body at the time, announced the franchise would not be automatically re-awarded. What was more, the IBA stipulated that ACC could hold no more than a 51 percent interest in Central and had to build and operate studios in regions served by the broadcaster with the latest in equipment.

A new company named Central Independent Television was formed to take control of the new Midlands franchise in January 1982. Major stockholders included ACC (51 percent), leisure group Ladbrokes (ten percent), publishing group DC Thomson (15 percent) and Pergamon (nine percent), led by the late Robert Maxwell. Central's boundaries at the time ranged from the borders of Wales in the west to Lincolnshire in the east, and from Cheshire in the north to the Home Counties in the south. Covering an estimated 14,000 square miles and serving more than nine million people, Central had the largest audience of Britain's 12 independent ITV broadcasters.

In May 1982, ACC was taken over by TVW Enterprises, led by Australian media magnate, Robert Holmes à Court. The IBA ruled that ACC's 51 percent stake in Central be put in trust, thus freezing its voting right until ACC had reduced its shareholding in the broadcaster. Therefore, in May 1983, ACC sold off its stake in Central. Sears Holdings purchased a 20 percent shareholding, Ladbrokes and DC Thomson increased their stakes to 20 percent each, and Pergamon took its ownership to 12.5 percent.

In line with IBA requirements, renovation of Central's four Birmingham studios at Broad Street was completed in 1982. A new broadcast center was opened a year later. In addition, Nottingham saw the opening of the $42.5 million, four-studio East Midlands Television Center in late 1983. The formal ribbon-cutting ceremony in March 1984 was attended by the Duke of Edinburgh.

IPO in 1986

In October 1986, Central issued public shares to be listed on the London International Stock Exchange. Institutional investors in London were among the broadcaster's leading stockholders.

From its beginnings, Central had a mandate to operate a local news service broadcast to each of the company's three main markets: Central West, East, and South. The broadcaster eventually had the most morning and evening local news viewers of any ITV news program. For its news broadcasts, Central was supplied with national and international programs by Independent Television News (ITN), the national news bureau owned and operated by all ITV regional broadcasters.

Central also continued to produce strong drama and entertainment programs for broadcast in its own market and throughout Britain and internationally. The broadcaster's most popular programs included the satirical weekly Spitting Image, the investigative current affairs program The Cook Report, and such drama series as Inspector Morse and Soldier Soldier.

Much, though certainly not all, of Central's drama output, tended towards high-brow content for sale abroad. The popular Legacy of Civilization series, a six-part documentary exploring the effects of ancient history on modern life, was an early example. British television has always emphasized cultural programming. Central and other ITV franchises still broadcast a large amount of ballet and opera to complement their lighter drama and entertainment content. Broadcasts of the established arts, though top sellers in foreign markets for Central, are in part defensive. Because quality of programming is a key factor in the granting of franchises to broadcasting companies, a tendency for high culture is often observed in ITV programming when franchises are up for renewal.

International Alliances, New Technologies in the Late 1980s

In 1986, Central established Television Sales and Marketing Services Ltd. (TSMS), a joint venture between itself and Anglia Television, another ITV broadcaster. The role of TSMS was to secure airtime sales and program sponsorships, in part to recover production costs. In addition, TSMS acted as consultant to international broadcasters like BBC Select, Nederland 1 in The Netherlands, and Westcountry.

In 1989, Central spent $10 million to build a high-tech regional news center at Abingdon, near Oxford. This gave the broadcasters three main regional centers: Abingdon, Nottingham, and Birmingham. In addition, Central operated offices in London, New York, Sydney, and Hamburg. Besides functioning as news-gathering centers, these international bureaus also facilitated international sales and sponsorship of Central's programs.

International cooperation between program makers had become the buzzword in the increasingly global television market during the late 1980s. Broadcasters found they could spread out the cost--and the risk--of producing programs, if they could bring in overseas partners. The key was recognizing, and taking advantage of, the demands of the television industry beyond their own home markets. British English-language programming--Central's included--had long secured wide audiences around the world, a legacy of the British Empire. Central looked to tap into this growing international system of coproduction, cofinancing, sales, pre-sales, and sponsor-packaging to reduce the cost of its own program production by pooling resources with others and securing yet more markets for its output.

Central also had to keep pace with rapid changes in the technology of the television industry. In the mid- to late 1980s, the number of terrestrial, cable, and satellite television channels worldwide was escalating. In addition, a revolution was taking place in high-definition television. Program production and distribution was entering the world of digital compression, which would multiply the available frequency spectrum and transform home television viewing.

The regional broadcaster was also looking to counter the growing influence of U.S. programs being sold to Europe and worldwide. As Leslie Hill, Central's managing director, said in 1990: "American culture seems to be in danger of overwhelming that of some other countries, including Britain. I believe we should guard against that." Hill felt that cooperation between foreign broadcasters, especially between those in Canada, Europe, and Australia, could not only reduce production costs but counter a U.S. programming offensive. "This international activity may appear to boost the ego and self-importance of an industry notoriously aware of its image, but it is this international cooperation that lies behind some of our more ambitious program projects," Hill commented. By the late 1980s, Central was the United Kingdom's top commercial exporter of programming to the United States.

International Coproductions Central completed the 1988 Legacy of Civilization documentary series, made in conjunction with Maryland Public Television. Another series, Nuclear Age, was produced along with WGBH, a Boston-based public television station, and NHK, a Japanese broadcaster.

Early 1990s Brings Deregulation

Deregulation of the British television industry, first introduced by then Prime Minister Margaret Thatcher in 1988, had a profound effect on Central Television's future. The British government sought to shake up the country's television market by ending the monopoly that existing ITV franchise broadcasters, including Central, seemingly enjoyed. The 1989 Broadcasting Bill, introduced by the government and leading to the 1990 Broadcasting Act, called for 16 ITV contractors to bid in May 1991 to retain their franchises against rival tenders.

With no anticipated rivals for its franchise, Central was expected to emerge strongly from the 1991 auction, since it could bid low and win. Prior to the sale, the broadcasting company had focused on its core strength: quality program production and distribution. For the East, West, and South Midlands television regions, Central bid a mere £2,000 ($3,400) per year. That figure paled in comparison to those of other ITV franchise bidders, who offered many millions as part of annual bids to the British treasury. But without a challenger, Central's low-ball bid won. In addition to this flat fee, Central agreed to pay the British Treasury 11 percent of each year's advertising, subscription, and sponsorship income. In October 1991, the company was granted the seven-day-a-week broadcast license extending from January 1, 1993 through the year 2002. This low cost structure would make Central what Variety magazine's Steve Clarke called "the best financial bet in British television."

Central profited yet again from the ITV auction after Meridian, a consortium in which Central held a 20 percent stake, was successful in securing the license to broadcast in South and South East England. Meridian was led by MAI, a financial services group whose businesses included brokerage and market research, and had a 65 percent stake in the bidding consortium.

In September 1991, just prior to the announcement of license awards, David Justham, Central's chairperson, died. He was replaced as company chair by Leslie Hill, who had joined Central as managing director in 1987. An accountant with no previous experience in broadcast television, Hill's ability to guide the company was viewed with skepticism. Over the next five years, however, the new leader of Central would earn the respect of both his broadcasting peers and his company's shareholders.

In November 1991, Central purchased its rented headquarters in Birmingham and renamed it West Midlands Television Center. Also that year, Television Sales and Marketing Services acquired the airtime sales operation of Ulster Television in Northern Ireland. Continued cost-cutting measures at this time included the sale in 1991 of Film Fair, the film animation company owned by Central. The broadcaster also disposed of its 25 percent stake in Starstream, the British children's channel, and Central Communications Network, once Central's in-house public relations department before becoming a consultancy. Central also refocused its business by severing ties with Chris Bearde Entertainment, a game show production house that had lost an estimated US$5 million, and Wordstar, a company providing newspapers and magazines with entertainment news worldwide. An internal reorganization split Central into three profit centers: Birmingham-based Central Broadcasting, charged with operation of the ITV license; Nottingham-based Central Productions, the programming arm; and London-based Central Television Enterprises, responsible for international operations. During this same period, employment at the company was slashed by more than half, from over 2,000 to 850.

Central's repositioning after the ITV auction was reflected in its bottom line. Although advertising revenues had fallen throughout the British broadcast market owing to the harsh recession of the early 1990s, Central still posted pre-tax profits up nearly 25 percent at £24.4 million for fiscal 1991, compared with a figure of £19.2 million a year earlier. This profit rise came as company sales continued falling. Revenues of £306.6 million in 1991 were down 2.7 percent from a year earlier, or £315.1 million in 1990. This performance was accomplished on pretax profits of £27 million posted in fiscal 1989, prior to the recession. The broadcaster's stock price multiplied from £3.40 (US$5.84) in 1987 to £12.53 (US$21.55) by the spring of 1992.

That year Zodiac, Central's USA program production subsidiary, unveiled its second animated program, Mr. Bogus. Its first series, Widget, began re-runs in the all-important U.S. television market. Also that year, Central Music was formed as a separate company within Central Productions to produce music-based programs largely funded by music companies and video distribution. Among its first programs was Bedrock 11, a late night music series, and Lafter Hours, featuring popular British comedians. Lafter Hours triggered a video distribution deal with Virgin Music, a leading British record producer and retailer.

Union With Carlton Communications in 1994

Central appeared in an enviable position among ITV broadcasters in holding the largest franchise, and yet paying the lowest Exchequer levy of a mere £2,000 annually. At the same time, its high profitability made Central a favorable takeover target. In fact, the number-three ITV broadcaster received its first takeover proposal in November 1993, just over one month before legislation permitting the purchase of ITV licensees went into effect. Central accepted the £26 per share, £624 million (US$925 million) bid from Carlton Communications plc during the first week of 1994. (Carlton had owned about 20 percent of Central's equity since 1987, and offered to purchase the remaining shares it did not already own. The bid valued Central at £758 million or US$1.12 billion.) Central's quick acquiescence prompted The Economist to frame the deal as "a defensive ploy by two companies frightened of being taken over themselves in 1994, when firms in the rest of Europe will be allowed to buy British commercial-TV stations."

Under the direction of Michael Green, Central's new parent had grown from a US$15 million enterprise in 1983 into a film processing and broadcast media giant. The addition of Central ITV vaulted Carlton Communications' commercial television broadcasting division from a mere seven percent of annual revenues to the company's biggest and most profitable business interest, and made Carlton the UK's second-largest ITV broadcaster. Central's estimated £400 million in revenues boosted Carlton's total turnover to a debt-free £1.4 billion in 1994. But as The Economist noted, Carlton was still "a pip-squeak" among global media firms like Rupert Murdoch's News Corp. Ltd., Time Warner Inc., Germany's Bertlsmann, and Walt Disney Company. Carlton executives countered that "size for size's sake is not important."

In 1997 analysts with Morgan Stanley, Dean Whitter asserted that "the glory days of ITV broadcasting are over," forecasting that the annual growth of advertising revenues would amount to about two to three percent over inflation. However, Central and Carlton's other ITV properties would continue to serve a valuable function at the media company by providing programming fodder for its growing third-party business. Carlton planned to parlay Central's string of critically- and popularly-acclaimed hits into high-profit international blockbusters.

Principal Divisions: World International Network; Zodiac; Television Sales and Marketing Services; Central Television Enterprises.