22.
With all these considerations in mind, the Authority came to the conclusion that a complementary second ITY service would enlarge the range of Independent Television’s output, with benefit to the viewer and to creative people working for the system—especially those whose talents could not find full expression within the confines of a single service which is unable to cater extensively for minority audiences in peak time. It remained to be seen whether what it wanted seemed feasible to those who were directly involved in the operation of the system.
23.
The companies, without exception, took the view that a second service, run on the lines so far described, was indeed possible and desirable. It was plain that the establishment of such a service could not be a very rewarding prospect financially for the companies, and indeed, for the first few years at least, would be almost certain to reduce profitability. Simple arithmetic, or the most general look at BBC 1 and BBC 2, made it plain that the increase in production costs brought about by a two-channel operation could not be matched by a comparable increase in total ratings. Nevertheless, the companies were in no doubt that proposals for ITV 2 should go forward and should be supported in principle by them. In our view, there are four main reasons for their attitude:
(i)
The companies, like the Authority, are sensitive to the limitations which a single-channel service imposes on the range of programmes which can be offered to the viewer, particularly in peak time. They are also even more aware than the Authority is of the amount of creative talent and ability within the system which could be producing worthwhile programmes (especially perhaps in the documentary and current affairs fields) if a two-channel system greatly increased (as it would) ITV’s freedom to present such fare in the evenings.
(ii)
There is inevitably much spare studio capacity and surplus potential in a system which (with ITN) has 16 production companies. The spare capacity has come into being over the years for a sound reason—that ITV depends on a federal and regional structure which is one of its strengths; nevertheless, it is frustrating both to those with production abilities and to those who care about managerial efficiency that this capacity cannot be fully used by a single channel. NBPI Report No. 156 discusses this problem and makes its plain that there are inevitably substantial reserves here which the companies would want to use. A second service would provide greater scope for those working in the system to produce programmes knowing that they would receive a wide showing. The result would be the fuller use of the capacity of a diverse system, and the injection of further elements of diversity into it.
(iii)
The possession of two channels by the BBC has upset the competitive balance between BBC and ITV in several ways, some obvious and some more subtle. For example, if ITV is providing an evening programme which is serious but not very popular, it can no longer expect to hold its audience on the basis that the opposition also will be a serious rather than a popular programme; for this will only be true of one of the two BBC channels, while the other, following the principles of complementary programming, will very often be popular and drawing off many viewers. Although the overall position has not yet seriously changed, it is natural that the companies should fear that, without a second ITV channel, a position might eventually be reached in which each of the three channels took a third of the audience. This consideration would apply with even greater force if the fourth channel were to be allocated in such a way that the ITV companies faced three competitors, rather than two as now, for the audience. Serious difficulties would obviously arise if there were a downward drift of audiences, not only for the companies but also for the Authority which would find it harder to impose its present public service requirements on the companies in such a situation.
(iv)
There are dangers to morale and to quality in a confined situation. All companies felt that the system must move forward and that, while ITV 2 might have disparate effects upon the prospects of individual companies, it was right that a new outlet and a new opportunity should be provided.
