The Problem with ITV – Episode 296 

23 September 2008

Distorted ITV logo

Michael Grade is threatening to hand back ITV’s Channel 3 regional licences. It is now claimed that under the current set up they are starting to become ‘unworkable’, though this actually means ‘potentially less profitable’. Whether this is an idle threat remains to be seen.

How important is the Channel 3 conduit to ITV?

It’s fair to say that if ITV were to carry out the threat of handing back its Channel 3 licences it would make life uncertain both for itself and for the STV, UTV and Channel licencees that rely on ITV’s offerings for the bulk of their output. A Channel 3 ‘vacuum’ in England and Wales would have to be filled by someone and at short notice too.

If the likes of Coronation Street and Emmerdale were to suddenly go walkies from their long standing Channel 3 position , it could make the digital switchover process more painless but it might alienate a fair number of viewers as well. The government may not relish the prospect of some couch potatoes taking out their grievances at the ballot box come the next election. It may not need the United Nations or the NHS to become involved but boy it matters to them and there are many. “ITV disappears from traditional telly choices” would play high on a Richter scale of news values.

The main problem still relates to the infamous contract rights renewal deal. This was conceived by Granada and Carlton’s previous managements in order to allow their merger to take place. It was drawn up with the expectation of holding ITV in check as the predominant commercial television player in the UK.

Unfortunately this prevents ITV plc from making more money at a point when advertisers are deserting the channel during economic hard times. BSkyB’s shareholding maneuvers screwed up any quick fix takeover that Virgin Media or the like could have attempted. Underlying problems would still exist and might drag down a potential purchaser.

Regional television production may be highly desirable from a public service perspective but it’s easy to perceive it as an additional overhead from an accountancy viewpoint. Ofcom seems to concur with at least some of ITV’s ongoing desire to ‘cut costs’ . This translates as ‘further protect shareholder value’ at the predictable expense of public service commitment.

ITV’s economic crisis will soon reach the stage where fundamentals may suffer if the underlying problems aren’t addressed; some of these problems (as well as CRR) predate Michael Grade’s appointment. This helps to complicate any strategy for navigating a workable turnaround for the company.

The message is clear. Michael Grade seems to be trying to use a Channel 3 ‘withdrawal threat’ to force the pace in the timetable on CRR reform. He is banking on someone at Ofcom being awake enough to realise this but after all these year of increasingly desperate solutions to ITV’s relentless decline, ITV by now just appears to be crying ‘wolf’ based on past form and a lengthening list of failed solutions.

There is a real danger for Grade that both Ofcom and government ministers will call ITV’s bluff this time, as Channel 4 is managing to make ends meet despite having fewer viewers and a stronger public service remit. There is also the forgotten danger that someone else could still profitably take up the Channel 3 franchises.

Perhaps Michael Grade ought to seriously contemplate other radical measures for ITV plc such as splitting the company into production and broadcast divisions or splitting ITV1 away from ITV’s other channels – or both. De listing the company from the stock exchange might be an idea, though the big City investment funds might want a permanent private stake in lieu. Perhaps the once unthinkable step of handing back selected regional Channel 3 licences might be considered. That would set the cat in the pigeons.

Above all and going back to real basics, ITV will ultimately have to face up to the fact that the “single ITV experiment” , merging Granada and Carlton under the current terms, has ended up a failure because the underlying attitude behind the amalgamation was entirely about shareholder value as opposed to making better television programmes.

The aggregation of most national ITV production resulted in Channel 3’s network programmes either staying the same or getting worse and ITV plc now has virtually all of its eggs in one basket. When that happens you have to be really sure what you are doing. Commercial considerations have repeatedly precluded stronger and more radical corrective measures in programming output.

Another conclusion we can draw from this now rather long running fiasco is perhaps surprising and encouraging at the same time. UK television viewers appear to be more discerning than many people within the media industry have been giving them credit for.

Restoring ITV’s reputation for programming you can trust has become an even greater uphill struggle. The recent quiz and premium rate scandals have affected everyone and it is this combined with the factors previously mentioned that conspire against a recovery within a reasonable timescale.

At one stage it was promised that a ‘single’ ITV (of course conveniently ignoring Scotland, Northern Ireland and the Channel Islands) would be able to produce world class programming and compete better in the US market which is something that greatly appealed to politicians at the time although many others realised the possible futility of those promises. Of course promising world class programming and actually making world class programming are two separate things and we all know what happened next.

Nineties ITV bosses had done a good job of convincing politicians that the UK needed another really large broadcaster to boost its programming exports though it later transpired that the BBC and independent producers ended up doing a better job of making worthwhile exports.

ITV plc became more insular under Charles Allen as it tried to cut costs instead while struggling with franchise integration. Michael Grade is trying to boost ITV Productions but this is anything other than an overnight job and Grade may well get the boot years before the production arm finally has a chance to shine properly.

Trying to integrate all the English ITV franchises into one operation (Wales as well, although that was left a little more to its own devices) proved to be far more costly and difficult than it was expected to be and the pain endured in the process almost became too much for ITV plc as a corporate entity.

The risk has now been spread to independent producers but the downside is that the risk for these companies is now even greater and ironically that many of them end up being acquired by larger groups.

It is hard not to conclude that if some external ITV takeover goes ahead before the underlying problems are addressed, then the main UK commercial channel will end up as bland identikit programming served up by a disinterested parent company. With yet another ‘latest solution to it’s problems’ ITV would continue to struggle to stand out in a multichannel environment and thus a long period of steady decline would not be arrested.

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