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A STUDY OF THE EVOLUTION OF MAKE/BUY CONTRACTING FOR UK INDEPENDENT TELEVISION (ITV): 1954-2001 Lynne Nikolychuk Submitted in Fulfilment of the Requirement of The Degree of Doctor of Philosophy Interdisciplinary Institute of Management London School of Economics and Political Science August 2005 UMI Number: U214955 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. Dissertation Publishing UMI U214955 Published by ProQuest LLC 2014. Copyright in the Dissertation held by the Author. Microform Edition © ProQuest LLC. All rights reserved. This work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, Ml 48106-1346 VjS*. F 5 0 1 « 1 - U- PREFACE The establishment of UK Commercial television and the ongoing programme supply make/buy arrangements of its main terrestrial operator ITV (Independent Television) has been studied as part of a broader social and business history pertaining to the emergence and development of both commercial and public service UK television broadcasting. Briggs (1970, 1995), Briggs and Spicer (1986), Briggs and Burke (2002) provide illuminating, general accounts of how socio-political concerns have interacted with economic interests in this industry. Descriptive accounts from industry insiders (Potter 1989,1990; Sendall 1982,1983) and others (Bonner & Aston 1998) richly supplement these academic business histories. Early attempts to form an economic perspective, such as Coase’s (1950) case study of the BBC, also reinforced the view that socio-political concerns shaped UK programme supply make/buy arrangements in significant ways. However, detailed empirical work about how the interplay between socio-political concerns and economic objectives evolved to shape the initial period of ITV’s programme supply make/buy arrangements, and the make/buy decisions of different programme types intended for showing on ITV, are limited. Further, explanations linking how changes to these arrangements in a later period affected programme supply make/buy decisions for some programme types had, when this research began, not yet been explored. Nonetheless, rival explanations exist, in particular Williamson (1975, 1985,1996) and Granovetter (1973,1985,1992) regarding the underpinning rationales for why particular make/buy arrangements arise and how they evolve. Whilst Williamson represents the established framework for considering the make/buy decision from an economic perspective, Granovetter’s economic sociology directly challenges this approach from a socio-political standpoint. These perspectives, described in Chapter One, provide a theoretical orientation aligned to Yin’s (1994; p. 13) technical definition of the case study strategy. This case, as the chosen research approach, does 2 not follow the form of testing hypotheses. Instead, it is a descriptive, historically based narrative that is supported by an analysis of state archives, interviews with key informants and analysis of official, confidential programme supply data. It provides an account of how the interplay between socio-political concerns and economic objectives shaped programme supply make/buy arrangements, and the make/buy decisions of programme types in the initial and later period of ITV. Chapter One sets out the research framework. First, it summarises and compares the key propositions of Williamson and Granovetter to suggest that jointly considering these two perspectives is relevant for the purpose of demonstrating how the interplay between them has driven a particular historical path to effect programme supply make/buy arrangements. Second, a description of how a workable research design was constructed, and the complications that arose, is provided. The study does not analyse programme supply make/buy decisions at the individual programme level. Instead, it retains an emphasis towards a broader approach (i.e. programme supply make/buy arrangements for ITV as a whole and make/buy decisions for specified programme types) to consider how the transacting environment in the pre-competitive period and early years of commercial television in the UK has impinged on programme supply make/buy decisions and how this situation changed over time to effect contemporary outcomes. Chapter two provides a detailed archival review of events during the pre-competitive period that led to the foundation of ITV and a constraint that disallowed the broadcaster to make programmes. It shows how socio-political fears, based on the potential negative impact commercial television might have on UK society, rather than economic objectives, were at the forefront of decisions even though those involved with designing the initial programme supply structure had a market oriented structure in mind and indeed, were obliged by legislation to do so. Chapter three examines how tradeoffs occurred between these socio-political concerns and economic objectives to establish ITV’s initial programme supply structure. It includes a detailed account of two applicants (ABDC and the Kemsley- Winnick Group) during the contractor selection process to illustrate the extent that economic priorities were willingly compromised to seek a reputable standing for UK 3 commercial television. During the selection process, we see efforts focused on removing a socio-politically unsuitable financial supporter (ABDC) and extensive effort made to retain a financial supporter deemed capable of elevating ITV’s reputation. Chapter four focuses on how the initial programme supply structure evolved to impinge upon the ways that programme supply make/buy decisions of the main programme types, intended for showing on ITV, could be expressed during the first contract period. It illustrates how constraints and preferences resulted in programme supply outcomes whereby costs were often a secondary concern and programme supply make/buy decisions were not always based on the least cost option available. Chapter five provides an account of how economic objectives came to outweigh the socio-political concerns evident in the pre-competitive and initial contract period. In particular, it outlines a build up of views toward modifying the initial programme supply structure to introduce competitive elements to it after 1990, and then examines the effect that these changes have had on make/buy decisions of ITV’s main programme types. A detailed review of programme supply data shows that programme supply make/buy decisions have tended towards lesser cost outcomes for some programme types, evidence of an economic rationale that was not previously apparent. Chapter six compares the empirical findings regarding ITV’s programme supply make/buy decisions and the evolving arrangements within which these decisions occurred during the time periods studied. It exemplifies how socio-political concerns impinged upon the ways that an economic rationale, evident even prior to ITV’s inception, could be expressed. The study concludes with a view that although ongoing relations amongst the groups involved in determining programme supply make/buy outcomes have co-existed with an economic purpose, an economic rationale, showing some consistency with Williamson’s perspective, only became a more relevant explanatory tool to programme supply outcomes as socio-political concerns shifted towards a market led orientation. 4 ABSTRACT This study is an account of how the interplay between socio-political concerns and economic objectives shaped programme supply make/buy decisions for establishing UK commercial television and the ongoing programme supply arrangements of its main terrestrial operator ITV (Independent Television). A main interest is to build a credible explanation of why make/buy decisions for programmes shown on ITV diverged from initial expectations that they would be determined on a competitive basis. The enquiry examines the underlying reasons that affected these decisions to show how socio-political fear of the potential impact commercial television might have on UK society impinged on the outcomes that prevailed and how changes occurred as this fear diminished. To achieve this aim, the investigation first focuses on the make/buy conditions impinging on decisions that led to the start up phase of UK commercial television. It is followed by a detailed examination of how programme supply make/buy arrangements for ITV evolved in the initial (1954 - 1964) and later (1990 - 2001) contract periods. These two contract periods are focused on as distinctive points of reference for guiding and containing the research within practical boundaries. The first represents a time when programme supply make/buy options were first established and the second when these options were substantively modified. An historical case study approach is applied, drawing upon state archives, interviews and programme supply statistics to explain the outcomes that prevailed. 5 Table of Contents PREFACE 2 ABSTRACT 5 TABLE OF CONTENTS 6 LIST OF TABLES 9 LIST OF CHARTS 11 LIST OF DIAGRAMS 11 LIST OF ABBREVIATIONS 12 LIST OF ARCHIVE SOURCES 13 LIST OF INTERVIEWEES 16 LIST OF APPENDICES 17 CHAPTER ONE 18 RESEARCH FRAMEWORK FOR STUDYING ITV’S PROGRAMME SUPPLY MAKE/BUY DECISIONS 18 1.1 The Research Question & Theoretical
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