RTL to increase Channel 5 budget in ITV battle

RTL Group, the European media giant created in April that controls Channel 5, yesterday pledged to wage war on ITV by holding out the prospect of a 50 per cent increase in the UK channel's annual programming budget to around £200m.

RTL Group, the European media giant created in April that controls Channel 5, yesterday pledged to wage war on ITV by holding out the prospect of a 50 per cent increase in the UK channel's annual programming budget to around £200m.

The aim is to boost the three-year old channel's share of national viewership to 10 per cent from 6 per cent currently. It coincides with Channel 5 becoming profitable for the first time after more than £300m in start-up losses.

Commenting on a programming budget increase to around £200m from £130m in the current year, Richard Eyre, RTL's director of content and strategy, said: "It's not inconceivable, but it's undecided."

Didier Bellens, RTL's chief executive, added: "We strongly believe with investment in programming we can increase the audience."

The challenge comes as ITV, which has a £1bn budget for programmes, is combating audience loss, particularly in homes served by BSkyB. It follows warnings from industry analysts that advertising revenue in the coming months is set to decline from levels of a year ago.

RTL obtained its 65 per cent interest in Channel 5 when the group was created through the merger of the broadcasting and online interests of Bertelsmann and Audiofina, of Belgium, with Pearson Television.

Announcing the media group's inaugural results, Mr Eyre said additional spending on drama, an area where ITV has scored numerous ratings successes, would be a key component of the additional investment. Mr Bellens said Channel 5's laddish image, derived from its diet of softcoreadult movies and alternative sports, could be repositioned. "By investing more, you may change the image a bit."

Mr Bellens said recent talks with Lord Hollick, chief executive of United News & Media, about buying the 35 per cent of Channel 5 that RTL doesn't already own, were inconclusive. "We can await the right opportunity and the right price."

Analysts have valued the channel at between £750m-£1bn. United News is likely to sell its stake following the recent sale of its three ITV franchises and programming making operations to Granada Media.

In the six months to June, RTL said pro-forma earnings before tax fell 55 per cent to 234m euros (£143m), reflecting a one-off gain from a disposal last year. Sales rose 21 per cent to 2bn euros.

RTL also agreed to pay 156m euros to buy a further 6 per cent of Spanish broadcaster Antena 3, raising its stake to 16 per cent.