In his Friday night performance, he accused the governors of presiding over a state of terminal decline, and meddling in management; and charged the BBC's leadership with showing disdain for programme-makers and mass-market television.
As the dust settles on his speech, the key question remains: was Grade's attack right? In the heady atmosphere at Edinburgh, it seemed the vast majority of programme-makers at the television festival were with him. But Edinburgh is not Britain. My view is that he was more right than wrong, but only just. He is certainly worth listening to, if only because he is the first person of any stature brave enough to provide an insider's view, however flawed, of the weaknesses of the Checkland-Birt era, 1987 to 1992.
He is right to make the point that the lay bunch of great and good governors has meddled too deeply in BBC managerial and programme matters, and has come from a too-narrow list of government-approved candidates. This is implicitly accepted by the board itself. Lord Nicholas Gordon Lennox, a BBC governor, came to Edinburgh 48 hours after Grade's speech and outlined plans for radical change. In future, governors will be there to guard the public interest, rather than to get too closely involved in management.
However, Grade's conclusion that the board should be abolished and regulation and licensing of the BBC passed to a pumped-up Independent Television Commission is, at this point, high risk. Until the new ITV franchises start in January, no one knows whether arm's-length regulation will work for British television, whether the system of fines to be introduced then will keep commercial broadcasters true to their programme promises, and whether the ITC will itself be free of political intervention.
Grade's second big attack was on the BBC's new policy of inclining towards up-market 'distinctive' programmes, which no one - not even the BBC's own top programme executives - yet knows how to interpret. Grade ridiculed it, for the first time in public. And he was absolutely right to make it an issue. Viewers and listeners should know that the traditional mix of programmes they now see on BBC 1 and BBC 2 (though BBC 2 is less of an urgent case) is under intense internal debate.
In the BBC's July annual report, Marmaduke Hussey, chairman of the board of governors, appeared to cement this commitment to 'distinctiveness'. He said: 'The BBC must ensure its wares are quality wares and are not being sold at the next stall.'
When Grade read this to the audience it was greeted with derisive laughter. To reduce it to the most absurd case, he asked whether it meant that if Survival shows penguins on ITV, penguins should be out of bounds for the BBC?
The flashpoints in the debate about the programme menu seem to be whether the BBC should drop down- market entertainment, or do it in a different way so it somehow ceases to be vulgar. Such is the grip of this appetite for change in the organisation's top policy-making circles that Michael Grade was thinking the unthinkable by daring to suggest that perhaps the current programme mix should continue broadly unchanged, in the formats to which viewers are accustomed.
Take Neighbours. Because it is a cheap Australian import, ideal in theory for the growing satellite market, it is apparently judged to be not a suitable BBC programme in future, once the current rights expire. But what is so wrong with imported soaps, Grade asked? And he has a point. Millions of addicted licence- payers, including my own family, who love Neighbours, would say the same thing. Does the new BBC really wish to incense the public by dropping it?
Grade also made it clear he belonged to the old school that sees the BBC's future survival rooted in and stemming from its long entertainment tradition - he recalled the glories of Steptoe and Son, Fawlty Towers, Till Death Us Do Part, and the soon-to-end comedy Only Fools and Horses.
The weakness of this view is that it exposes Grade to the charge of nostalgia. His speech did not show an intellectually convincing way of amalgamating respect for the past with objectives for a long-term future. He also said that in the business-obsessed, efficiency-seeking climate, 'no one at the top of the BBC has much good to say about the programmes'. But just how good are they? The problem is that the BBC's programme portfolio is not especially glorious at the moment. It does have lacklustre and fading shows such as Esther Rantzen's That's Life. It has clung too long to fading formats such as the now defunct Wogan show. Nor is there anything wrong with the BBC demanding ever-higher standards, even from its successes, let alone actors who can act in Eldorado.
Above all, Grade failed to say just how the BBC should adapt its mix in the light of the success of satellite and the breakdown of the old duopoly, as ITV becomes far more commercial and unrestrained in the hunt for big audiences.
It is, on the other hand, chilling to hear what the new orthodoxy envisages: public service broadcasting composed of programmes that would be 'good for' the public, and in which Panorama's low ratings appear perfectly acceptable because it is a serious programme. These people, who think they represent the new BBC, and whose own tastes in viewing lead them to Newsnight and The Late Show, shudder as viewers tastelessly insist on making huge BBC hits out of Bruce Forsyth's Generation Game, and Jim Davidson's Big Break snooker game show.
They regard the BBC's latest ratings triumph, Michael Buerk's rescue show, 999, as a regrettably borderline case. And they say that Eldorado will never be 'a BBC programme', even if 20 million people one day watch it.
This is what the influential BBC executives who are in the ascendant are saying in private. They see satellite as the new provider of mass-market programming. But it is an uncomfortable fact for them, and ammunition for Grade, that so far satellite is offering wall-to-wall sport, films and children's programmes, but no specially made popular entertainment, comedy or drama.
Finally - and here Michael Grade is most seriously wrong - the BBC, whatever happens, has to slim down and become more efficient. The ill-understood policy of producer choice being driven through has few genuine supporters within the organisation; but Grade's view that the production base needs only to be slimmed down a bit is far too relaxed. Nor did he provide any alternative system that would allow the BBC to price and cost individual programmes. This has to be done.
What is correct is his depiction of the disrupted, demoralised workforce and the tragedy of having talented programme-makers distracted from their real jobs. One of the most surprising conversations I had in Edinburgh was with a management consultant earning large fees teaching BBC staff to negotiate business deals with each other - under producer choice, for example, camera crews sell their skills at fixed tariffs to the drama department, and by April next year everybody will be negotiating with everybody else all the time.
This consultant said he had never known an organisation in such a mess, totally lacking leadership, and he had worked in quite a few.
Michael Grade has ended the eerie public silence on Britain's most important cultural institution. He may be wide of the mark, but he has exposed a critical gap in the BBC's defences since he left it in 1987. No one near the top of the corporation has an ounce of Grade's popular touch, or is able to communicate its strategies direct to the public.
There are clever people who think they know how to strike deals with David Mellor and John Major, but there are no real communicators. It is better to be noisily half-right and to stir up debates than to remain cautiously silent.
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